hampshire police and crime commissioner draft statement of accounts … · 2020-06-15 · narrative...

Hampshire Police and Crime Commissioner

Draft

Statement of Accounts 2019/20

Contents

Page 1 Police and Crime Commissioner for Hampshire – Statement of Accounts 2019/20 - DRAFT

Contents Page

1. Narrative Statement .................................................................................................... 2

2. Statement of Responsibilities for the Statement of Accounts .................................... 20

3. Movement in Reserves Statement - Group ............................................................... 21

4. Movement in Reserves Statement PCC .................................................................... 22

5. Balance Sheet - Group .............................................................................................. 23

6. Balance Sheet - PCC ................................................................................................ 24

7. Cash Flow Statement - Group ................................................................................... 25

8. Cash Flow Statement - PCC ..................................................................................... 26

9. Comprehensive Income and Expenditure Statement - Group ................................... 27

10. Comprehensive Income and Expenditure Statement - PCC ..................................... 29

11. Notes to the Core Financial Statements .................................................................... 30

12. Pension Fund Account ............................................................................................ 104

13. Annual Governance Statement - Police and Crime Commissioner ......................... 107

14. Independent Auditor's Report - Group and Commissioner ...................................... 116

15. Glossary…………………………………………………………………………………….117

Narrative Statement


INTRODUCTION The Statement of Accounts has been prepared in accordance with the requirements of the Chartered Institute of Public Finance and Accountancy (CIPFA), and sets out the overall financial position of the Police and Crime Commissioner for Hampshire and the Group Accounts for the year ending 31 March 2020. The accounts have been prepared using the International Financial Reporting Standards (IFRS), in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2019/20. The Statement of Accounts aims to provide information so that members of the public, including electors and residents of Hampshire, IOW, Portsmouth and Southampton, partners and stakeholders can:

Understand the overarching financial position of the PCC (and the ‘PCC Group’ including Hampshire Police)

Have confidence that the PCC has spent public money wisely and has been accounted for in an appropriate manner

Be assured that the financial position of the PCC (and Group) is sound and secure The style and format of the accounts complies with CIPFA standards and is similar to that of previous years. The information contained within these accounts are presented as simply and clearly as possible, but by their nature are both technical and complex. This narrative report aims to help readers better understand the role of the PCC, and to assist in understanding and interpreting the accounts through an explanation and overview of the financial performance and activities during 2019/20. EXPLANATION OF THE PCC AND GROUP The Police & Crime Commissioner (PCC) and the Chief Constable are established as separate legal entities. The PCC is elected by the public every four years to secure the maintenance of an efficient and effective police force and to hold the chief constable to account for the exercise of her functions and those of persons under her direction and control (it should be noted that due to the current Covid-19 pandemic, the PCC elections scheduled for May 2020 have been postponed until May 2021, thus extending the current term of the PCC to 5 years). The Chief Constable has a statutory responsibility for the control, direction and delivery of operational policing services in the Hampshire Police area. This set of accounts focuses on those discrete activities which the PCC is directly responsible for, such as commissioning services for victims and witnesses of crime, as well as the “PCC Group” which includes all aspects of operational policing under the direction and control of the Chief Constable. The Chief Constable has produced a separate set of accounts which explains how the resources provided by the PCC have been used to deliver operational policing services. The Net Revenue Budget for the Group for 2019/20 was £337m, of which £28.2m million was under the PCC’s direct control.

Narrative Statement


INTRODUCTION TO HAMPSHIRE In policing terms Hampshire Constabulary is the second largest non-metropolitan police force in England and Wales, and covers the county of Hampshire and also the Isle of Wight. The combined population of the Hampshire Constabulary area is approximately 2 million. The PCC and Constabulary work in partnership with a whole range of organisations, including the 4 upper tier authorities (Hampshire County Council, and the unitary councils in the IOW, Southampton and Portsmouth), and the 11 district councils. The Constabulary delivers a number of services in collaboration with other Police Forces across the south of England, including:

Counter Terrorism South East South East Regional Organised Crime Unit Shared IT, Information Management and a Joint Operations Unit (which includes

strategic operations, roads policing, firearms and dog unit) with Thames Valley Constabulary

The PCC and Constabulary are also part of a joint working arrangement with Hampshire County Council and Hampshire Fire and Rescue Service for the provision of professional support services including finance, human resources, facilities management and procurement across the three organisations. Internal audit and pensions services are also provided through this arrangement. Further information on Collaboration is set out later in this narrative report under Non Financial Performance. THE POLICE AND CRIME COMMISSIONER The core functions of the Commissioner for Hampshire and the Isle of Wight are to secure the maintenance of the police force for the area and to ensure that the police force is efficient and effective. Other key functions include:

Holding the Chief Constable to account Appointment / suspension / removal of the Chief Constable Setting the priorities for the Force and producing the Police and Crime Plan Attending the Police and Crime Panel Setting of the annual budget and Council Tax precept Direct engagement with the public Publishing an annual report stating how priorities and targets have been met, and

other information as specified by the Secretary of State to enable greater public awareness of police and crime performance in the area

Collaborating for an efficient and effective Criminal Justice System for Hampshire and the Isle of Wight with partners such as the Youth Offending Team, Crown Prosecution Service and Prison Service etc.

The Commissioner is ultimately accountable to the electorate via the ballot box. A Police and Crime Panel (PCP) is also established under the Police Reform and Social Responsibility

Narrative Statement


Act 2011 and is charged with scrutinising and supporting the work of the Commissioner. The Panel, however, cannot hold the Chief Constable to account. The PCP’s core functions include:

To review the draft Police and Crime Plan To publicly scrutinise the Commissioner's Annual Report To review and scrutinise decisions and actions of the Commissioner To review and have the power to veto the Commissioner's proposed Council Tax

precept levels To review the Commissioner’s Conduct – the PCP can suspend the Commissioner if

he is charged with a minimum of a 2-year imprisonable offence and report to the Independent Police Complaints Commission, however they cannot remove the Commissioner

To confirm the Chief Constable’s appointment To appoint an acting Commissioner, if required.

The Police and Crime Panel work through a number of sub / working groups to be able to give greater visibility to the detail of the work undertaken by the Commissioner and his team. The Finance Working Group was established to review each aspect of the Commissioners work to deliver a budget that supports efficient and effective policing in the Hampshire Policing Area as well as to test and advise the Panel on the work that leads up to the setting of the Council Tax Precept. The Commissioner has established a joint audit committee with the Chief Constable. Its purpose is to provide independent advice on the adequacy of the corporate governance and risk management arrangements in place and the associated control environment, advising according to good governance principles and proper practices. More specifically, this includes the following terms of reference:- Review the corporate governance arrangements against the good governance

framework and consider annual governance reports and assurances Review the Annual Governance Statements (AGS) prior to approval and consider

whether they properly reflect the governance, risk and control environment and supporting assurances and identify any actions required for improvement

Consider the arrangements to secure value for money and review assurances and assessments on the effectiveness of these arrangements

Consider the framework of assurance and ensure that it adequately addresses the risks and priorities of the OPCC and the HC

Monitor the effective development and operation of risk management, review the risk profile, and monitor progress of the PCC and the CC in addressing risk-related issues reported to them

Consider reports on the effectiveness of internal controls and monitor the implementation of agreed actions

Review anti-fraud arrangements (including whistleblowing procedures) and the assessment of fraud risks and potential harm from fraud and corruption and monitor the effectiveness of the counter-fraud strategy actions and resources

Further consideration and advice in relation to Internal Audit, External Audit, Financial Reporting, Partnership Governance and Accountability Arrangements.

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The Police and Crime Plan sets out the Commissioner’s vision and priorities for policing and community safety across Hampshire and the Isle of Wight and is available in both summary and full version on his website at www.hampshire-pcc.gov.uk. The vision of the Commissioner is to make Hampshire and the Isle of Wight safer.

As set out earlier, due to the impact of Covid-19, the current term of office for the Commissioner has been extended through until May 2021. In light of this, the Commissioner has provided a new interim Police and Crime plan, ‘A Plan for our Safer Futures 2020 - 2022 and this can be accessed using the link below: https://www.hampshire-pcc.gov.uk/commissioner/my-police-crime-plan/plan-for-our-safer-futures

THE PCC AND GROUP’S FINANCIAL PERFORMANCE Revenue Budget 2019/20 In February 2019, the Commissioner approved funding for a net revenue budget for 2019/20 for the Group of £337m, an increase of £22m on the previous year. This increase was funded through an increase in government grant of £3.8m, and an increase in the Police element of the Council Tax (Band D precept) of £24 (raising £18m). Revenue Expenditure Outturn The financial performance of the group over the year is set out below and more detail is shown in the accounts which follow. In 2019/20, the reported outturn position for the Group, subject to audit, was net expenditure of £327.3m on policing services for the people of Hampshire and the Isle of Wight, for the costs of the Office of the Police and Crime Commissioner and for commissioning services in accordance with the Police and Crime Plan objectives. This net expenditure position represents an underspend for the year of £9.961M (2.95% underspend), which has been transferred to the general fund reserve. Within this sum, it is anticipated that £5.86m will need to be drawn down in 2020/21 to fund carry forward requests for work (primarily IT related projects £5.6m) which was in progress but not complete at year end.

http://www.hampshire-pcc.gov.uk.

https://www.hampshire-pcc.gov.uk/commissioner/my-police-crime-plan/plan-for-our-safer-

Narrative Statement


PCC Controlled Expenditure The table below provides a high level analysis of the income and expenditure directly controlled by the Commissioner for 2019/20, in the format of the management accounting figures prepared for scrutiny by the PCC, and shows a net underspend for the year of £1.266m. Outturn 2019/20 Budget Actuals Variance £'000 £'000 £'000

Expenditure owned by the PCC Office of the PCC 2,219 2,214 (5) Commissioning 2,281 2,276 (4) Estates 17,709 16,656 (1,053) Capital Financing 3,086 3,083 (3) Interest on balances (500) (700) (200) Contributions to/(from) reserves 3,410 3,410 (0) Net expenditure owned by the PCC 28,205 26,940 (1,265)

PCC Group Level The table below provides a high level comparison between the approved budget for 2019/20 and actual expenditure at the Group Level (i.e. PCC and Chief Constable), and shows at a Group level an overall underspend for the year of £9.961m. Outturn 2019/20 Budget Actuals Variance £'000 £'000 £'000 Funding (337,297) (337,297) 0 PCC Controlled Budget 28,205 26,940 (1,265)

Hampshire Constabulary ITD 19,549 19,797 248 Contact Management 22,167 24,164 1,998 R&P 47,371 44,870 (2,501) P&N 50,214 45,484 (4,729) Investigations 75,802 72,971 (2,832) JOU 22,237 23,575 1,338 Support Services 58,646 57,980 (666) Corporate 13,107 11,556 (1,551) Net Hampshire Constabulary 309,092 300,397 (8,696)

Net total expenditure for PCC Group 337,297 327,336 (9,961)

Net Revenue Position (Under)/ Overspend 0 (9,961) (9,961)

Narrative Statement


Capital Expenditure Capital expenditure is incurred on the acquisition and enhancement of the Commissioner's assets which have a life of more than one year. The PCC approved a Capital Programme of £36.8m for 2019/20 in February 2019, including costs for the next phase of the Estates Change Programme (ECP).

The capital programme was updated and revised in the year to reflect the removal of a capital budget for ICT; the ICT expenditure was reviewed and deemed to meet the accounting definition of revenue expenditure and as such was funded from the revenue budget. The 2019/20 programme was revised to £13.3m in the Budget 2020/21 report. Total expenditure in 2019/20 was £8.3m. Of this, £6.7m was spent on buildings and £1.6m on vehicles. The capital expenditure was funded by capital receipts, capital grant and revenue contributions; no internal borrowing was required to fund the capital programme in 2019/20. A summary of expenditure against the approved capital programme, and the financing thereof, is set out below:

2018/19

2019/2

0 £m £m

Expenditure: 31.2 Land & Buildings 6.7

2.3 Vehicles (Including Boats) and Plant 1.6 0.0 IT & Operational Equipment 0.0

33.5 Total 8.3 Funded by:

1.2 Government Grant 1.2 10.2 Capital Contributions 0.0

7.1 Capital Receipts 3.8 Donated Assets 0.0

5.8 Revenue Contributions 3.3 9.2 Borrowing (incl. Internal) 0.0

33.5 Total 8.3

Narrative Statement


Outlook – Medium Term Financial Strategy Budget 2020/21 Revenue The revenue and capital budget for 2020/21 and Medium Term Financial Strategy were approved by the Police and Crime Commissioner in February 2020 and published on the PCC’s website. The revenue budget for 2020/21 at the Group level is £367m, as shown in the table below.

Budget 2020/21 £'000

Funding Government Grant (218,472) Council Tax Precept (147,619) Collection Fund Surplus (607) Total Funding (366,698)

Expenditure PCC Controlled Budget 44,584 Hampshire Constabulary Budget 322,114

Net total expenditure for PCC Group 366,698

Net Revenue Position 0

The amount of funding raised through Council Tax is based on the precept increase agreed by the PCC, which for 2020/21 was for a precept increase of £10 on a Band D property in line with the referendum limit set by Government, and taking into account the supportive views of the public consultation and the views of the Police and Crime Panel Police Officer Uplift Nationally the Government made a commitment to fund an uplift in police officer numbers by 20,000 nationally over the 3 year period 2020/21 – 2022/23, with an initial uplift in numbers in year 1 of 6,000 officers; Hampshire’s share of this year I uplift was 156 officers, and grant funding of £4.358m was made available (which equated to £28,000 per officer) as part of the grant settlement for 2020/21 to fund this uplift. The revenue budget therefore includes provision for an uplift in police officer numbers in Hampshire by 156 during the course of 2020/21. Capital The capital programme for 2020/21 includes £15.8m of planned expenditure. Of this amount £13.5m relates to new estate and £2.3m relates to replacement vehicles. This is funded by £16.6m of in-year capital receipts, £0.3m from capital grant and £3.6m from revenue

Narrative Statement


contributions. If all the capital receipts are realised then there will be a surplus of £4.7m to contribute towards capital spend in future years. Medium Term Financial Strategy The Medium Term Financial Strategy (MTFS) for the period 2021/22 – 2023/24 is based on an assumption that the PCC will be able to increase the Police element of the council tax precept (Band D) by 2% per annum from 2021/22 onwards, and in the absence of any guidance on future government grant allocations, includes a prudent assumption of ‘flat cash’ for government grant settlements for the period 2021/22 to 2023/24. Police Officer Uplift Following the initial national uplift of 6,000 officers for 2020/21, there remains a further uplift of 14,000 officers to be delivered in years 2 (2021/22) and 3 (2022/23); no guidance has yet been issued yet by the government on individual Force allocations nor funding for this remining uplift. The MTFS therefore assumes that Hampshire’s share of the 14,000 uplift over 2021/22 and 2022/23 will be an increase in officer numbers of 150 in each year. The funding assumption is that Hampshire will receive Uplift grant funding each year on the same proportionate basis (based on 150 officers per annum) as the funding received in 2020/21 (which equated to £28,000 per officer), which in the absence of any funding proposals from government, is felt to be a prudent assumption. Based on these prudent assumptions, whilst the MTFS shows a balanced budget position for 2021/22, the position for 2022/23 and 2023/24 is that all other things being equal, further savings would be required in those years to balance the budget. Treasury Management The Capital and Investment Strategy and Treasury Management Strategy are both approved annually by the Police and Crime Commissioner and published on the website. These documents contain a more detailed explanation of the economic outlook and the agreed prudential indicators. The authorised limit for external debt was £93.1m for 2019/20 and is £86.5m for 2020/21. Debt (£31m) did not exceed the Capital Financing Requirement of £56.17m at 31 March 2020. Borrowing The Prudential Code allows the Commissioner to borrow money as long as it is prudent, affordable and sustainable. In accordance with his borrowing strategy for 2019/20 the Commissioner did not take out any new loans and financed capital expenditure incurred during the year through a use of capital grant, capital receipts and earmarked reserves. Some of the existing borrowing at the start of the financial year was repaid using resources set aside for such purposes. As a result, at the year end the Commissioner had a total of £30.45m of outstanding PWLB loans at actual interest rates ranging between 2.65% and 6.0% and a weighted average overall rate of 4.26% (all debt outstanding is legacy debt which pre-dates the establishment of PCCs). Of the total outstanding debt, £0.5m of principal is repayable in 2020/21 and is

Narrative Statement


classified as a current liability in the accounts, leaving £29.95m as long term borrowing shown on the balance sheet. Investment The Commissioner has an investment portfolio consisting of reserves and short-term cash flows (including on-call cash investments). We continue to invest according to a low risk, high quality lending list as outlined in the Investment Strategy for 2019/20. Cash balances reached an average of £59.695m during the year and this generated interest and dividends of £0.703m, which was an increase over the £0.653m achieved in 2018/19, with the average yield increasing from around 1.06% to 1.18%. At 31 March 2020 the investment holding stood at £48.33m. In March 2020, in response to the Covid-19 pandemic, the Bank of England decreased the base rate of interest twice, first to 0.25% on the 13th March, and then further to 0.1% on the 23rd March, having previously held this at 0.75% since August 18. The rate is now at an historic low, although the impact in year of this rate reduction was immaterial given the rate changes were not implemented until mid March. Low base rates would benefit the Commissioner in that he is able to borrow (if required) to finance the capital programme at very low rates. However, the downside is that the rates of return on interest received on surplus cash balances, which are credited to the income and expenditure account, and which helps to reduce the burden on the council tax payer, are very low. Pensions The revaluation of the police pension scheme used a reduced discount rate, resulting in the employer contribution rate being increased from 24.2% to 31.0% of pensionable pay for 2019/20. There is no change to the pensions earned or paid to police officers, so the increase in employer contribution rates will mean that police forces are paying more towards the overall cost of the police pension schemes underwritten and owned by the Home Office. A new specific grant towards pension costs of £3m was received in 2019/20. Along with the general grant increase of £4m, this assisted in funding additional employer contributions for police officers of circa £7.5m.

The Commissioner’s net pension liability is included in the balance sheet in accordance with accounting standards including an estimate of the impact of the McCloud judgement that concluded the transitional provisions introduced to the reformed judges and firefighters pension schemes in 2015 gave rise to unlawful age discrimination. The Government’s application to appeal the decision was denied by the Supreme Court on 27 June 2019. Consequently, the Government has stated its intention to engage fully with the Employment Tribunal to agree how the discrimination will be remedied for all the main public service pension schemes, including Police. The actuary has modelled the assumed remedy with reference to developments in the Employment Tribunals of other public service schemes.

Overall, the net pension liability has decreased by £200m from £3,794m at 31 March 2019 to £3,594m at 31 March 2020. The Commissioner’s assessed share of the value of the plan assets of the Local Government Superannuation scheme showed a decrease of £9m while the assessed present value of the Commissioner’s liabilities on all pension schemes decreased by £209m. The large negative IAS19 pension reserve is mainly due to the police pension scheme being an unfunded scheme i.e. with no fund assets to offset future liabilities when existing police

Narrative Statement


officers have all retired. The difference between pension fund outgoings and incomings is met by top-up grant from the Home Office. Therefore, the statutory arrangements for funding the liability mean that the Commissioner's and the Group’s financial position remains sound. Reserves The requirement for reserves is covered in sections 32 and 43 of the Local Government Finance Act 1992, which require billing and precepting authorities in England and Wales to have regard to the level of reserves needed for meeting estimated future expenditure when calculating the budget requirement. Earmarked reserves remain legally part of the general fund but are accounted for separately. All reserves are held by the Commissioner with two exceptions; the accumulated absences account and the pensions reserve. Both of these reserves are unusable (i.e. not cash-backed). The balance on the accumulated absences account at 31 March 2020 was £4.340m (£4.197m at 31 March 2019) and the balance on the pensions reserve was £3,594m (£3,794m at 31 March 2019). As of 31 March 2020 the general reserve stood at £18.949m before any additional transfers to earmarked reserves are approved by the Commissioner. This general reserve balance represents an increase of £8.159m when compared to 31 March 2019. Part of the increase relates to £5.8m (mainly for ICT £5.6m) which will need to be drawn down to fund in flight projects in 2020/21. The Transformation Reserve balance stood at £18.992m at 31 March 2020, which will assist with funding the ongoing cost of change. The Commissioner’s Reserve is held to support the Commissioner’s priorities and support delivery of the Police and Crime Plan. The reserve stood at £0.888m at 31 March 2020. For the 2020/21 budget, two new earmarked reserves have been created:

i) Officer Uplift Reserve - this reserve set funding aside (£14.3m) to meet the future non pay costs and infrastructure requirements in support of increased officer numbers over the next 3 years. This will ensure that as officer numbers increase incrementally, funding is available for the necessary equipment, training, infrastructure etc. that will be required.

ii) Estates Uplift Reserve - a recurrent sum of £1m has been set aside as a contribution to this reserve to fund the tactical changes to the estate in the short term to accommodate the increase in officer numbers, and in the longer term to provide a contribution to support borrowing for the capital investment to deliver strategic changes to the estate to accommodate the overall impact of the 3 year Uplift programme.

The medium-term financial strategy approved by the Commissioner as part of the 2020/21 budget setting process shows how reserves will be used to support the change programme over the medium-term. However, it is important to note that of these usable reserves, £7.826m belongs to the ACRO Criminal Records Office and associated activities, partly as a surety (£4.326m) but mainly to support its on-going activity (£3.500m). The notes to the accounts provide further details of the year end balances and the purpose of each reserve.

Narrative Statement


Uncertain Future Events Brexit The United Kingdom exited the European Union on 31 January 2020. Transitional arrangements remain in place but the event has led to continued short term increased political and economic uncertainty, further impacted by the Covid-19 crisis which has been the main focus of government. The eventual position on Brexit (including whether the UK exits the EU with or without a trade deal) post 31 December 2020 does have the potential to impact the PCC’s and Group’s finances going forward and the estimates and assumptions which impact on the accounts and the MTFS. However, it is too early to predict the impact on the financial statements, as the long term effects are still uncertain, and there is likely to be significant ongoing uncertainty for some time. The PCC and Chief Constable will continue to review the impact in the coming months. Covid-19 As a result of measures to counter Covid-19, the Government issued guidance and enacted legislation from March 2020 that has a significant impact on the wellbeing of people and the national economy. The PCC has developed an interim Police and Crime Plan to set strategy and ensure effective direction is maintained during the time of emergency and transition to new ways of working. As the PCC elections have been postponed and the PCC’s term in office extended until May 2021, the PCC has provided an updated interim plan through to 2022. The PCC has provided additional financial support to a number of organisations from whom he commissions services, primarily focused on enabling additional support for specific issues impacted as a result of the Covid-19 lockdown provisions, for example domestic violence. It is not clear what the medium term implications will be for the Constabulary but at the point of publishing the accounts, policing activity and performance remains strong. During the Covid-19 period to date, provision of services has continued to be strong. Officer and staff availability levels have been high due to low sickness and cancellation of training. Total crime and demand has reduced allowing time to deliver a patrol strategy which implements the new laws and is compliant with social distancing for our people. Personnel whose roles allow them to work from home have moved to homeworking. The digital strategy has been reprioritised and with the help of some changes in the national control restrictions, working from home has been successful in terms of delivering business as usual without the need to be in the workplace. Supply chains remain stable. There were no issues of concern as at the reporting date. The Force has been able to obtain sufficient levels of personal protective equipment to carry out business as usual. There are no major non-financial risks at present, but risks could be presented if personnel levels change or the high level of public compliance with the law changes. The recovery plan is currently focused on creating a working environment where social distancing rules can be observed. The financial impact of Covid-19 will depend on the duration of the COVID-19 period and crucially how the health of Constabulary personnel is affected. As attendance has been

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good, there has been no need for extensive overtime as yet. The digital strategy changes have brought plans forward and led to reprioritisation so the additional digital cost is not material. Costs for additional equipment are not material. There could be a loss of Driver Awareness Training income, although courses are now being run online to mitigate losses; Hampshire chooses to ringfence Driver Awareness Training income in a separate Safer Roads Fund so the loss of income can be absorbed by that Fund and will not impact on business as usual. From a cashflow perspective, there are no issues given the low additional associated costs. Furthermore, Government has released the Pension Grant early and will pay the Uplift Grant earlier to assist with cashflows. There may be a currently unquantifiable impact going forward on sales values for properties earmarked for disposal should general market conditions deteriorate as a result of Covid-19, and there could be slippage generally in the delivery of the in-year capital programme due to delays arising as a consequence of the Covid-19 lockdown. The capital programme will be reviewed as the year progresses to assess impact, but reserves are available if necessary to support the programme should there be any material impact on assumed capital receipts. The impact on both costs and cash flow arising from Covid-19 continues to be monitored. Whilst so far the cost impact has not been material, the PCC holds reserves which can be utilised if required to support short/medium term spikes in expenditure, and given the overall level of reserves, the PCC CFO and the Constabulary CFO anticipate that additional costs can be absorbed. The position will be kept under review, and in particular the CFO’s will be mindful of the potential impact on council tax collection, and on collection fund position as it impacts the 2021/22 budget. The PCC CFO assessment is that the Covid-19 crisis has not had a significant financial impact on the Group financial position, and that the PCC and Constabulary will continue to operate as a Going Concern; further information is set out in the Going Concern section that follows. Going Concern The negative impact of Covid-19 on the finances of organisations, both public and private, has been well documented. In the public sector the significant pressures experienced have led to many organisations raising concerns as to their financial stability and sustainability, and it has been muted that in some of these organisations it may be necessary for Chief Financial Officers to issue Section 114 notices. As neither a Police and Crime Commissioner nor a Constabulary can be created or dissolved without statutory prescription, the going concern assumption in the Accounting Code of Practice therefore assumes that both the Hampshire Police and Crime Commissioner and Hampshire Constabulary continue to operate for the foreseeable future, and that the accounts are therefore presented on a going concern basis. Whilst there is no statutory change to this position, the impact of Covid-19 on the going concern of the both the PCC and the Constabulary has been reviewed and is set out below In comparative terms, whilst policing has been impacted by Covid-19, the financial impact thus far has been limited compared with many other public sector bodies.

Narrative Statement


In Hampshire, the CFOs of both the PCC and the Constabulary have reviewed the impact of Covid-19 to date, and also the potential impact in the medium term, and have drawn the conclusion that whilst additional costs have been incurred, the overall financial risks presented by Covid-19 are not proving to be significant, and can be managed within the overall resources available including if necessary from reserves. The CFOs are content that the PCC and Constabulary will continue to operate on a going concern basis for the foreseeable future. This review of going concern in light of Covid-19 is in addition to but supported by the conclusions the PCC CFO set out in his recent Section 25 statement, which was completed alongside the PCC setting the precept and budget for 2020/21, and the medium term financial strategy for the period 2021/22 - 2023/24. That budget report and Section 25 statement included the following conclusions: ‘The PCC CFO’s assessment is that the level of the General Fund reserve is reflective of the overall risk environment in which the PCC operates’ ‘the budget report for 2020/21 and the MTFS have been based on prudent funding assumptions, which should mean that PCC is well placed to respond to and manage changes in funding’ ‘Whilst there are risks within the MTFS these have been mitigated as far as possible and it would take a significant change in the funding regime to create a scenario which the PCC and Chief Constable could not manage over the course of the MTFS’. It is the view of the both the PCC CFO and the Constabulary CFO that the above conclusions remain valid, particularly as the cost impact of Covid-19 on policing in Hampshire is not significant and is manageable within the overall resources available. Whilst the current and forecast medium term financial position remains stable, the PCC and Constabulary CFOs will continue to evaluate any evolving financial impact from Covid-19 on the sector in general and Hampshire in particular, and will review any impact for financial sustainability going forward. NON FINANCIAL PERFORMANCE Inspection Outcomes In February 2020 Her Majesty’s Inspector of Constabularies and Fire and Rescue Services (HMICFRS) reported their Police Efficiency Effectiveness and Legitimacy (PEEL) assessment of the extent to which Hampshire Constabulary keeps people safe and reduces crime. The full report is available on line: www.justiceinspectorates.gov.uk/hmicfrs/wp-content/uploads/peel-assessment-2018-19-hampshire.pdf The outcome was that the HMICFRS graded the Constabulary ‘good’ overall and in all subsections in effectiveness, efficiency and legitimacy. The following observations were made by Her Majesty’s Inspectorate:

http://www.justiceinspectorates.gov.uk/hmicfrs/wp-content/uploads/peel-assessment-2018-19-

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“I am pleased with Hampshire Constabulary’s overall performance, and the force continues to improve despite being one of the lowest funded forces in England and Wales.

“The force has successfully addressed many of those areas where we identified it could do better in our previous inspections. We have seen improvements in how it investigates and records crime, protects vulnerable people and treats its staff and the public. In other areas, work is in progress.”

“I am particularly pleased to see the work that the force does to protect victims of domestic abuse. It is making good use of a range of options to both support victims and to protect them by preventing offending behaviour by perpetrators”.

“I strongly commend Hampshire Constabulary for sustaining its positive performance over the past year”.

The Constabulary monitors operational performance through the Force Performance Group. Five key metrics are used that cover confidence and satisfaction, commission rates, outcomes and wellbeing. As an example, the public confidence chart from the National Crime Survey is shown below:

Management of Risk Strategic risk registers are maintained by both the Commissioner and the Chief Constable on separate risk registers, and are reported to each meeting of the Joint Audit Committee. Papers for the Joint Audit Committee can be accessed using the link below: www.hampshire-pcc.gov.uk/transparency/scrutiny/joint-audit-committee Performance Further information on performance can be found on the Commissioner’s website and on the Chief Constable’s website at: www.hampshire-pcc.gov.uk/performance and www.hampshire.police.uk/police-forces/hampshire-constabulary/areas/sd/stats-and-data/ Collaborative working The Commissioner and the Constabulary continue to work with police bodies, including the National Police Air Service, Police ICT Company, the South East Region Organised Crime Unit and Counter Terrorism Policing South East. There is increasing national co-ordination

http://www.hampshire-pcc.gov.uk/transparency/scrutiny/joint-audit-committee

http://www.hampshire-pcc.gov.uk/performance

http://www.hampshire.police.uk/police-forces/hampshire-constabulary/areas/sd/stats-and-data/

Narrative Statement


through the Policing Vision 2025 and Police Transformation Fund. A South East Region Integrated Processes (SERIP) team has been created to co-ordinate collaboration within the region. Hampshire Constabulary and Thames Valley Police have also created a bilateral partnership. The Commissioner has entered into a collaboration agreement with Thames Valley in order to create a joint Information & Communications Technology (ICT) and Information Management department, with a shared Assistant Chief Officer having direct responsibility for the provision of ICT and information management assurance for both Forces. A Joint Operations Unit has also been created using another collaboration agreement with Thames Valley Police allowing strategic operations, roads policing, firearms and dogs units, to be delivered in collaboration between the two forces across departmental and geographical boundaries (although not a collaborated function, the Hampshire Constabulary Marine Unit is also managed through the Joint Operations Unit). A collaboration agreement was signed in 2016/17 for Contact Management, and the new contact management solution went live in Hampshire in January 2020 and is scheduled to go live in TVP in 2020/21. The Policing and Crime Act 2017 placed a statutory obligation on emergency services to collaborate and enables Police and Crime Commissioners (PCCs) to take on the responsibility for fire and rescue services in their area, where there is a strong local case to do so. The Constabulary has an ongoing active programme of collaboration with Hampshire Fire and Rescue Services. This already includes the sharing of buildings, including a shared headquarters. In line with the provisions within the Police and Crime Act 2011, the PCC undertook an options appraisal during 2017/18 to review the governance arrangements for Fire. The outcome was that the PCC determined, due to the strong collaboration arrangements already in place, not to submit a business case to change the current governance arrangements at the present time. The Constabulary entered into a joint working arrangement in 2014/15 with Hampshire County Council and Hampshire Fire and Rescue Service for the provision of professional support services including finance, human resources, facilities management and procurement across the three organisations. Internal audit and pensions services have subsequently been added. The services are hosted but not controlled by Hampshire County Council as they are delivered with joint direction, governance, control and senior management with each organisation accounting for its share of the costs. The PCC undertook a full review of the shared service partnership arrangements during 2019 in relation to both the PCC and Constabulary to ensure arrangements continue to deliver the anticipated benefits from partnership working and continued to provide value for money, reaching a positive conclusion on both counts. Hampshire Constabulary is collaborating with Hampshire County Council on a joint laboratory facility and with the University of Portsmouth on a shared Digital Forensics centre of excellence.

Narrative Statement


The ACRO Criminal Records Office and its associated national units are hosted by Hampshire. Collaborative agreements in respect of ACRO are in place with all 43 forces in England and Wales as at 31 March 2020. The Commissioner’s total useable reserves included within Other Earmarked Revenue Reserves £7.826m of reserves which are held on behalf of ACRO. These reserves are ringfenced to ACRO and are not available to the Commissioner to support delivery of his Police and Crime Plan nor can they be used by the Commissioner to support Policing within Hampshire. STATEMENT OF ACCOUNTS The Police Reform and Social Responsibility Act 2011 established the Police and Crime Commissioner and the Chief Constable as separate entities (known as ‘corporations sole’). As separate bodies, both the Commissioner and the Chief Constable are required to appoint their own Chief Finance Officers, each with statutory responsibilities, as being the person responsible for proper financial administration under the provisions of the Act. A consequence is also that each body is required to be subject to audit under the Local Audit and Accountability Act 2014 and are thus required to prepare a set of accounts. Additionally, the Commissioner, with his ultimate control over the Chief Constable’s resources, has to prepare group accounts. The Home Office has produced a Financial Management Code of Practice (FMCP) which sets out the responsibilities of the respective Chief Finance Officers. This was updated by the Home Office in 2018. The FMCP outlines how the two bodies should work together in managing the finances and covers such things as the Scheme of Corporate Governance which includes the Scheme of Consent, Financial Regulations and Contract Standing Orders and delegation which identifies the powers and responsibilities of each CFO. The Police and Crime Commissioner’s and the Group Financial Statements for 2019/20 consist of the:

Statement of Responsibilities for the Statement of Accounts Movement in Reserves Statement Balance Sheet Cash Flow Statement Comprehensive Income and Expenditure Statement Notes to the Accounts Police Pension Fund Account Annual Governance Statement (Commissioner) Independent Auditor’s Report

Relationship between Accounting Statements The different accounting statements are linked in several important ways. The Movement in Reserves Statement shows the movement in the year on the different reserves held by the Commissioner, analysed into ‘usable’ reserves (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The Cash Flow statement reconciles to the balance on the Comprehensive Income and Expenditure account for the year and the movement in Balance Sheet liquid assets and liabilities.

Narrative Statement


The Comprehensive Income and Expenditure Statement balance is reconciled in the Movement in Reserves Statement to the actual movement in the general fund cash reserve. Changes to the Accounts Due to the disruption caused by Covid-19, the statutory dates for publishing the accounts were changed this year. The deadline for publishing the draft accounts was moved to 31 August, although our draft accounts were published in early June. The deadline for publishing the audited accounts has been moved to 30 November. It was not until near the end of 2019/20 that Covid-19 began to cause severe disruption, so most of the financial impact will be shown in accounts for 2020/21 rather than 2019/20. Significant changes in accounting policies There have been no significant changes in accounting policies in the year. Underlying accounting principles Four underlying principles have been employed in order to prepare the accounts so that they demonstrate: a) Understandability The accounts are based on accounting concepts, treatments and terminology that assume that a reader has:

A reasonable knowledge of the business of Police and Crime Commissioners and the ways in which services are provided;

A reasonable knowledge of accounting; and A willingness to study the information required with reasonable diligence.

However, every effort has been made to use plain language and where technical terms are unavoidable they have been explained in the glossary of terms. b) Relevance The accounts provide information about the Commissioner’s, the Chief Constable’s and the Group’s financial performance and position that is useful for assessing the stewardship of public funds and for making economic decisions. Information is presented so that it will assist readers to understand the Group’s current financial position or to make predictions about its financial trends. The relevance of information contained in the accounts is affected by its nature and materiality (whether its misstatement or omission might reasonably be expected to influence assessments of the Group’s stewardship, economic decisions or comparisons with other organisations based on financial statements) and therefore a judgement has been made about the levels of materiality to ensure that relevant issues are disclosed. c) Reliability The financial information within the accounts has been prepared so that it:

Can be depended upon to represent faithfully what it either purports to represent or could reasonably be expected to represent and therefore reflects the substance of the transactions and other events that have taken place;

Narrative Statement


Is free from bias (i.e. it is neutral); Is free from material error; Is complete within the bounds of materiality and cost; and Under conditions of uncertainty, it has been prudently prepared (i.e. a degree of

caution has been applied in exercising judgement and making the necessary estimates).

d) Comparability Comparability (i.e. the ability to compare the Group’s performance between financial years and with other organisations), is an important mechanism for ensuring the usefulness of financial information (and is an essential element of the best value accounting framework). The application of the terms, accounting policies and requirements of the Chartered Institute of Public Finance and Accountancy Code of Practice on Local Authority Accounting in England (2019) Statement of Recommended Practice is the way in which the Commissioner and the Chief Constable have ensured consistency of financial information in the financial statements leading to comparability. Material Assets Acquired or Liabilities Incurred The PCC jointly purchased a building to support the regionally delivered Regional Organised Crime Unit. The purchase price was £8.235m which was funded on a shared basis by Hampshire, Thames Valley, Sussex and Surrey PCCs; the Hampshire share was 26.45%. Unusual Charges or Credits within the accounts There were no unusual charges or credits in the accounting period. Significant Provisions or Contingencies As a result of the adoption of International Financial Reporting Standards (IFRS), there is a requirement to accrue for any annual leave, flexitime and time off in lieu which had been earned but not taken at 31 March each year. The amount accrued at 31 March 2020 was £4.340m (£4.197m as at 31 March 2019). Further information Further information on these accounts is available from the Chief Finance Officer, Police and Crime Commissioner for Hampshire, c/o Hampshire County Council, The Castle, Winchester, SO23 8UB. Telephone: 0370 779 7883, e-mail: [email protected]

mailto:[email protected]

Statement of Responsibilities


The Police and Crime Commissioner’s Responsibilities The Police and Crime Commissioner is required to:

Make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this organisation, that officer is the Chief Finance Officer;

Manage the organisation’s affairs to secure economic, efficient, and effective use of resources and safeguard its assets;

Approve the Statement of Accounts. The Chief Finance Officer’s Responsibilities The Chief Finance Officer is responsible for the preparation of the Commissioner’s Statement of Accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Code). In preparing this Statement of Accounts, the Chief Finance Officer has:

selected suitable accounting policies and then applied them consistently;

made judgements and estimates that were reasonable and prudent;

complied with the Code of Practice on Local Authority Accounting;

kept proper accounting records which were up-to-date; and

taken reasonable steps for the prevention and detection of fraud and other irregularities. Certification of Accounts The Chief Finance Officer’s Statement I certify that the Statement of Accounts for 2019/20 give a true and fair view of the financial position of the Commissioner and the group at 31 March 2020 and its income and expenditure for the year then ended

Signed: Andrew Lowe, CPFA Date: 15 June 2020

Movement in Reserves Statement - Group


This statement shows the movement in the year on the different reserves held by the Commissioner and Group, analysed into 'usable reserves' (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The Surplus or (Deficit) on the Provision of Services line shows the true economic cost of providing the Commissioner's and Group’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. This is different from the statutory amounts required to be charged to the General Fund Balance for council tax (precept) setting. The Net Increase/Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Commissioner and Group.

General Fund

Balance

Capital Receipts Reserve

Capital Grants Unapplied Reserve

Total Usable Reserves

Unusable Reserves

Total Group Reserves N

ote

29

£'000 £'000 £'000 £'000 £'000 £'000

Balance at 31 March 2018 (75,924) - - (75,924) 3,410,981 3,335,057

Movements during 2018/19

Total Comprehensive Income and Expenditure 222,272 - - 222,272 673 222,945

Adjustments between accounting basis & funding basis under regulations

(213,898) - - (213,898) 213,898 - 2

(Increase)/Decrease in year 8,374 - - 8,374 214,571 222,945Balance at 31 March 2019 (67,550) - - (67,550) 3,625,552 3,558,002


Total Comprehensive Income and Expenditure 148,047 - - 148,047 (367,364) (219,317)


(157,256) - - (157,256) 157,256 - 2

(Increase)/Decrease in year (9,209) - - (9,209) (210,108) (219,317)Balance at 31 March 2020 (76,758) - - (76,758) 3,415,444 3,338,686

Movement in Reserves Statement - PCC


General Fund

Balance

Capital Receipts Reserve

Capital Grants

UnappliedTotal Usable

ReservesUnusable Reserves

Total Reserves N

ote

Note 29

£'000 £'000 £'000 £'000 £'000 £'000

Balance at 31 March 2018 (75,924) - - (75,924) (169,553) (245,478)


Total Comprehensive Income and Expenditure

8,083 - - 8,083 (2,630) 5,453


291 - - 291 (291) - 2

(Increase)/Decrease in year 8,374 - - 8,374 (2,921) 5,453 Balance at 31 March 2019 (67,550) - - (67,550) (172,475) (240,025)


Total Comprehensive Income and Expenditure

24,333 - - 24,333 (43,858) (19,525)


(33,542) - - (33,542) 33,542 - 2

(Increase)/Decrease in year (9,209) - - (9,209) (10,316) (19,525)Balance at 31 March 2020 (76,759) - - (76,759) (182,791) (259,550)

Balance Sheet – Group


The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Commissioner and Group. The net assets of the Group (assets less liabilities) are matched by the reserves held. Reserves are in two categories. The first category is usable reserves, i.e. those reserves that the Group may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use. The second category is those that the Group is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line 'Adjustments between accounting basis and funding basis under regulations'. A separate statement follows after the Group Balance Sheet to show the Commissioner’s Balance Sheet.

31 March 2019 31 March 2020 Note

£'000 £'000226,767 Property, plant and equipment 237,942 15

10,324 Long term investments 6,819 17295 Long term debtors 295 17

237,386 Long Term Assets 245,056

21,082 Short term investments 12,576 17

1,350 Assets held for sale 400 1,010 Inventories 1,010

30,352 Short term debtors 36,790 176,047 Cash and cash equivalents 27,672 18

59,841 Current Assets 78,448 (679) Short term borrowing (677) 17

- Grants received in advance - revenue - 7

(212) Other short-term liabilities -(30,059) Short term creditors (37,667) 17

- Provisions -(30,950) Current Liabilities (38,344)

28,892 Net Current Assets 40,104 (30,450) Long term borrowing (29,950) 17

- Other long term liabilities -(3,793,830) Net liability related to pension schemes (3,593,895) 19

(3,824,280) Long Term Liabilities (3,623,845)

(3,558,002) Net Assets/(Liabilities) (3,338,685)

Financed by:(67,550) Usable reserves (76,759) 4

3,625,552 Unusable reserves 3,415,444 3

3,558,002 Total Reserves 3,338,685 Signed: Andrew Lowe, CPFA (Chief Finance Officer) Date: 15 June 2020

Balance Sheet – PCC


31 March 2019 31 March 2020 Note

£'000 £'000226,767 Property, plant and equipment 237,942 15

10,324 Long term investments 6,819 17

295 Long term debtors 295 17

237,386 Long Term Assets 245,056

21,082 Short term investments 12,576 17

1,350 Assets held for sale 400 1,010 Inventories 1,010

30,352 Short term debtors 36,790 17

6,047 Cash and cash equivalents 27,672 18

59,841 Current Assets 78,448 (679) Short term borrowing (677) 17

(212) Other short-term liabilities -(25,862) Short term creditors (33,327) 17

(26,753) Current Liabilities (34,004)

33,089 Net Current Assets 44,444 (30,450) Long term borrowing (29,950) 17

(30,450) Long Term Liabilities (29,950)

240,025 Net Assets/(Liabilities) 259,550

Financed by:(67,550) Usable reserves (76,759) 4

(172,475) Unusable reserves (182,791) 3

(240,025) Total Reserves (259,550) Signed: Andrew Lowe, CPFA (Chief Finance Officer) Date: 15 June 2020

Cash Flow Statement - Group


The Cash Flow Statement shows the changes in cash and cash equivalents of the Commissioner during the reporting period. The statement shows how the Group generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Group are funded by way of taxation and grant income or from the recipients of services provided by the Group. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Group's future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Group.

2018/19 Restated * 2019/20

£'000 £'000 Note

222,272 Net (surplus) or deficit on the provision of services 148,047 CIES

(238,539) * Adjustments to net surplus or deficit on the provision of services for non-cash movements

(166,549) 22b

18,440 Adjustment for items included in the net surplus or

deficit on the provision of services that are investing and financing activities

5,014

22c

2,173 Net cash flows from Operating Activities (13,488)

(9,918) * Investing Activities (8,639) 22d

1,066 Financing Activities 502 22e

(6,679) Net (increase) or decrease in cash and cash equivalents (21,625)

632 Cash and cash equivalents at the beginning of the reporting period (6,047)

(6,047) Cash and cash equivalents at the end of the reporting period (27,672) 18

*The 2018/19 figures for adjustments to net surplus on the provision of services for non-cash movements and investing activities have been corrected for an error identified, increasing the adjustment to net surplus on the provision of services for non cash movements from (£236.667m) as previously stated to (£238.539m) and increased the net cash inflow from investing activities from £0.304m to (£9.918m).

Cash Flow Statement - PCC


2018/19 Restated * 2019/20

£'000 £'000 Note

8,083 Net (surplus) or deficit on the provision of services 24,333 CIES

(24,351) * Adjustments to net surplus or deficit on the provision of services for non-cash movements

(42,835) 23b

18,440 Adjustment for items included in the net surplus or

deficit on the provision of services that are investing and financing activities

5,014

23c

2,172 Net cash flows from Operating Activities (13,488)

(9,918) * Investing Activities (8,639) 23d

1,066 Financing Activities 502 23e

(6,680) Net (increase) or decrease in cash and cash equivalents (21,625)

633 Cash and cash equivalents at the beginning of the reporting period (6,047)

(6,047) Cash and cash equivalents at the end of the reporting period (27,672) 18

*The 2018/19 figures for adjustments to net surplus on the provision of services for non-cash movements and investing activities have been corrected for an error identified, increasing the adjustment to net surplus on the provision of services for non cash movements from (£236.667m) as previously stated to (£238.539m) and increased the net cash inflow from investing activities from £0.304m to (£9.918m).

Comprehensive Income and Expenditure Statement - Group


These statements show the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Police and Crime Commissioners raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement. During 2019/20 the service segments used by the PCC and Constabulary were updated and the new segments are presented in the Comprehensive Income and Expenditure Statements (CIES) that follow. This supports accountability and transparency as it reflects the way in which the services are operated and performance is managed. To reflect this change in the CIES the prior year figures have been restated under the new service segments. The overall deficit on provision of services for the Chief Constable, PCC and the group as a whole remains unchanged, however the net cost of Policing Services has increased by £2.53m in PCC and Group accounts. This increase is due to the inclusion within Operational Policing services of the £2.53m expenditure on national policing initiatives, such as the National Police ICT systems, which has previously been reported within other operating income and expenditure within the PCC’s accounts.

Comprehensive Income and Expenditure Statement - Group


Gross expenditure (restated)

Gross Income

(restated)

Net expenditure

Gross expenditure

Gross Income

Net expenditure N

ote

£'000 £'000 £'000 £'000 £'000 £'000

364,359 (43,679) 320,680 Operational policing services 384,918 (53,204) 331,714

2,422 (3) 2,420 Office of the Police and Crime Commissioner 2,298 (84) 2,214

4,527 (2,380) 2,148Police and Crime Commissioner - Commissioning 6,026 (3,750) 2,276

32,466 (566) 31,899 Police and Crime Commissioner - Estate 57,109 (272) 56,837

114,189 (14,795) 99,395 Other items not allocated to services 22,611 (19,287) 3,324

517,964 (61,423) 456,542 Cost of Policing Services 472,962 (76,597) 396,365 11

Other income and expenditure:-

56,620* (56,620)* - Other operating income and expenditure 51,278 (51,278) - 5

240 240 (Gain) / loss on disposal of asset - (2,064) (2,064)

93,020 (847) 92,172Financing and investment income and expenditure 92,300 (732) 91,568 6

- (326,682) (326,682) Taxation and non-specific grant income - (337,822) (337,822) 7

149,880* (384,149)* (234,270) Total other (income)/expenditure 143,578 (391,896) (248,318)

222,272(Surplus) or Deficit on the Provision of Services 148,047

(2,630) (Surplus) or deficit on revaluation of PPE assets (43,858)

3,303 Remeasurement of the net defined pension benefit liability/(asset) (323,506)

673 Other Comprehensive (Income)/Expenditure (367,364)

222,945 Total Comprehensive (Income)/Expenditure (219,317)

2018/19 2019/20

*Group 2018/19 Other operating income and expenditure included an inter-group transaction in error relating to Home Office funding for the Police pension schemes totalling £56.62m. This has been corrected in the 2018/19 comparative figures reducing other operating gross expenditure and gross income previously stated as £115.773m and (£113.240m) respectively and total other gross expenditure and gross income previously stated as £208.963m and (£440.700m) but with no change in the reported net expenditure figures.

Comprehensive Income and Expenditure Statement - PCC


Gross expenditure

Gross Income

Net expenditure

Gross expenditure

Gross Income

Net expenditure N

ote

£'000 £'000 £'000 £'000 £'000 £'000

2,422 (3) 2,419 Office of the Police and Crime Commissioner 2,298 (84) 2,214

4,527 (2,380) 2,147Police and Crime Commissioner - Commissioning 6,026 (3,750) 2,276

32,466 (566) 31,899 Police and Crime Commissioner - Estate 57,109 (272) 56,837

39,416 (2,949) 36,467 Cost of Policing Services 65,433 (4,106) 61,327 11

Other income and expenditure:-

56,620 (56,620) - Other operating income and expenditure 51,278 (51,278) - 5

240 240 (Gain) / loss on disposal of asset (2,064) (2,064)

1,340 (847) 492Financing and investment income and expenditure 2,310 (732) 1,578 6

- (326,682) (326,682) Taxation and non-specific grant income - (337,822) (337,822) 7

58,200 (384,149) (325,949) Total other (income)/expenditure 53,588 (391,896) (338,308)

(289,482) (Surplus) or Deficit on the Provision of Services before funding

(276,981)

297,565 Intra-group funding 301,314

8,083(Surplus) or Deficit on the Provision of Services 24,333

(2,630) (Surplus) or deficit on revaluation of PPE assets (43,858)

(2,630) Other Comprehensive (Income)/Expenditure (43,858)

5,453 Total Comprehensive (Income)/Expenditure (19,525)

2018/19 2019/20

Notes to the core financial statements


Contents of Explanatory Notes to the Core Financial Statements 1. Expenditure and Funding Analysis .......................................................................... 31

2. Adjustments between accounting basis and funding under regulations ................... 33

3. Unusable Reserves .................................................................................................. 37

4. Usable Reserves ...................................................................................................... 41

5. Other operating income/expenditure ........................................................................ 44

6. Financing and investment income and expenditure ................................................. 44

7. Grant Income ........................................................................................................... 45

8. Officer and Staff Remuneration ................................................................................ 48

9. Termination Benefits ................................................................................................ 53

10. External Audit Costs ................................................................................................ 54

11. Nature of Expenses ................................................................................................. 54

12. Related Parties ........................................................................................................ 56

13. Capital Financing Requirement ................................................................................ 57

14. Leases ..................................................................................................................... 59

15. Property, Plant and Equipment (PP&E) movements - Group and Commissioner .... 61

16. Valuation Information ............................................................................................... 67

17. Financial Instruments ............................................................................................... 67

18. Cash and cash equivalents ...................................................................................... 79

19. IAS19 (Pensions Accounting) entries and disclosures ............................................. 79

20. Provisions, Contingent Liabilities and Contingent assets ......................................... 89

21. Events after the reporting period .............................................................................. 90

22. Cash flow statement - notes (Group) ....................................................................... 91

23. Cash flow statement - notes (PCC) .......................................................................... 94

24. Statement of Accounting Policies and Estimation Techniques................................. 96

25. Critical Judgements in Applying Accounting Policies ............................................... 98

26. Assumptions made about the future and other major sources of estimation uncertainty ............................................................................................................. 102

27. Accounting Standards that have been issued but not yet adopted ........................ 103



1 Expenditure and Funding Analysis The Expenditure and Funding Analysis (EFA) shows how annual expenditure is used and funded from resources (government grants, council tax precept and business rates) in comparison with those resources consumed or earned in accordance with generally accepted accounting practices as presented in the Comprehensive Income and Expenditure Statement. The EFA also shows how this expenditure is allocated for decision making purposes between services. As disclosed within the note to the CIES, during 2019/20 the service segments used by the PCC and Constabulary were updated and the new segments are presented in the CIES, including the update of the prior year figures. The prior year figures disclosed in the EFA have therefore also been updated to reconcile to the new CIES presentation, with the net deficit on the provision of services to the general fund remaining unchanged.

Expenditure and Funding Analysis - GroupNet

Expenditure chargeable

to the General

Fund Balance

Adjustments between

accounting and funding

basis

Net expenditure in the CIES

Net Expenditure chargeable

to the General

Fund Balance

Adjustments between


basis (see note 2)


£'000 £'000 £'000 £'000 £'000 £'000

294,861 25,819 320,680 Operational policing services 300,391 31,323 331,714

2,420 - 2,420Off ice of the Police and Crime Commissioner 2,214 - 2,214

2,148 - 2,148Police and Crime Commissioner - Commissioning 2,276 - 2,276

13,782 18,117 31,899 Police and Crime Commissioner - Estate 16,656 40,181 56,837

2,705 96,690 99,395 Other items not allocated to services 923 2,401 3,324

315,915 140,626 456,541 Net cost of Policing Services 322,460 73,905 396,365

(307,541) 73,272 (234,269) Other income and expenditure (331,669) 83,351 (248,318)

8,374 213,898 222,272Net (Surplus)/deficit on the provision of services (9,209) 157,256 148,047

(75,924)Opening General Fund (including earmarked reserves) balance at 1 April

(67,550)

8,374Plus net (surplus)/deficit on the provision of services (9,209)

(67,550)

Closing General Fund (including earmarked reserves) balance at 31 March (76,759)

2018/19 2019/20



Expenditure and Funding Analysis - PCCNet

Expenditure chargeable

to the General

Fund Balance

Adjustments between


basis


Net Expenditure chargeable

to the General

Fund Balance

Adjustments between


basis (see note 2)


£'000 £'000 £'000 £'000 £'000 £'000

2,420 - 2,420Off ice of the Police and Crime Commissioner 2,214 - 2,214

2,148 - 2,148Police and Crime Commissioner - Commissioning 2,276 - 2,276

13,782 18,117 31,899 Police and Crime Commissioner - Estate 16,656 40,181 56,837

18,350 18,117 36,467 Net cost of Policing Services 21,146 40,181 61,327

(307,541) (18,408) (325,949) Other income and expenditure (331,669) (6,639) (338,308)

(289,191) (291) (289,482)Net (Surplus)/deficit on the provision of services before funding

(310,523) 33,542 (276,981)

297,565 - 297,565 Intra-group funding 301,314 301,314

8,374 (291) 8,083Net (Surplus)/deficit on the provision of services (9,209) 33,542 24,333

(75,924)Opening General Fund (including earmarked reserves) balance at 1 April

(67,550)

8,374Plus net (surplus)/def icit on the provision of services (9,209)

(67,550)

Closing General Fund (including earmarked reserves) balance at 31 March (76,759)

2018/19 2019/20



2 Adjustments between Accounting and Funding Basis

The tables that follow represent the adjustments for the Group as a whole. The majority of the adjustments relate to the accounts of the Commissioner. The exceptions to this are the adjustments in respect of the Pensions Reserve and the Accumulated Absences Accounts, which relate to the Chief Constable’s accounts.

2019/20 Adjustments for capital purposes

Net change for the

pensions adjustments

Other adjustments

Total Adjustments

Adjustments between accounting and funding basis analysis:-

£'000 £'000 £'000 £'000

Operational policing services - 31,180 143 31,323Office of the Police and Crime Commissioner - - - -Police and Crime Commissioner - Commissioning - - - -Estates Change Programme 40,181 - - 40,181

Other items not allocated to services - 2,401 - 2,401

Net cost of services 40,181 33,581 143 73,905

Other income and expenditure from the funding analysis (8,325) 89,990 1,686 83,351

Difference between the General Fund surplus or deficit and the Comprehensive Income and Expenditure surplus or deficit

31,856 123,571 1,829 157,256

Note a) Adjustments for capital purposes:Charges to services for depreciation and impairment 7,594 7,594Revaluation losses on property, plant & equipment 211 211Service revenue expenditure funded from capital under statute 32,376 32,376Current value of assets disposed 1,736 1,736Statutory minimum revenue provision for capital financing (1,777) (1,777)Revenue contributions to capital (3,270) (3,270)Capital grants and contributions applied (note i) (1,214) (1,214)Total transferred to capital adjustment account (including note i) 35,656 35,656Transfer asset sale proceeds to capital receipts reserve (3,800) (3,800)Note a) Total 31,856 31,856



Adjustments from General Fund to arrive at the Comprehensive Income and Expenditure Statement Accounts

Adjustments for Capital Purposes (Note a)

Net change for the

Pensions Adjustments

(Note b)

Other Adjustments

(Note c) Total

Adjustments

£'000 £'000 £'000 £'000Note b) Adjustments for pensions:Current service cost of funded local government pensions 83,827 83,827Past service cost of funded local government pensions 2,401 2,401Interest on net pension liability 89,990 89,990Total transferred to Pension Reserve 176,218 176,218Employer's contributions payable to the pension fund transferred from the Pension Reserve (52,647) (52,647)Note b) Total 123,571 123,571

Note c) Other adjustments:Difference between accrued cost of employee holiday benefits and those taken, transferred to the accumulated Absences Account 143 143Movement in fair value of financial instruments transferred to the Financial instrument adjustment account 997 997Difference between accrued income from council tax and business rates and that required by statute to be paid over by Billing Authorities, transferred to the Collection Fund Adjustment Account 689 689Note c) Total 1,829 1,829

Total adjustments 157,256(note i) transfer from capital grants unapplied reserve -

157,256Total adjustments between accounting and funding basis under statute



2018/19Adjustments

for capital purposes (note a)

Net change for the

pensions adjustments

(note b)

Other adjustments

(note c) Total

Adjustments

Adjustments between accounting and funding basis analysis:-

£'000 £'000 £'000 £'000

Operational policing services - 25,730 89 25,819Office of the Police and Crime Commissioner - - - -Police and Crime Commissioner - Commissioning - - - -Estates Change Programme 18,117 - - 18,117

Other items not allocated to services - 96,690 - 96,690

Net cost of services 18,117 122,420 89 140,626

Other income and expenditure from the funding analysis (18,102) 91,680 (306) 73,272

Difference between the General Fund surplus or deficit and the Comprehensive Income and Expenditure surplus or deficit

15 214,100 (217) 213,898

Note a) Adjustments for capital purposes:Charges to services for depreciation and impairment 15,895 15,895Revaluation losses on property, plant & equipment 53 53Service revenue expenditure funded from capital under statute 2,169 2,169Current value of assets disposed 7,309 7,309Statutory minimum revenue provision for capital financing (1,190) (1,190)Revenue contributions to capital (5,781) (5,781)Capital grants and contributions applied (note i) (11,372) (11,372)Total transferred to capital adjustment account (including note i) 7,083 7,083Transfer asset sale proceeds to capital receipts reserve (7,068) (7,068)Note a) Total 15 15



Adjustments from General Fund to arrive at the Comprehensive Income and Expenditure Statement Accounts

Adjustments for Capital Purposes (Note a)

Net change for the

Pensions Adjustments

(Note b)

Other Adjustments

(Note c)Total

Adjustments

£'000 £'000 £'000 £'000Note b) Adjustments for pensions:Current service cost of funded local government pensions 70,030 70,030Past service cost of funded local government pensions 96,690 96,690Interest on net pension liability 91,680 91,680Total transferred to Pension Reserve 258,400 258,400Employer's contributions payable to the pension fund transferred from the Pension Reserve (44,300) (44,300)Note b) Total 214,100 214,100

Note c) Other adjustments:Difference between accrued cost of employee holiday benefits and those taken, transferred to the accumulated Absences Account 89 89Amortisation of premiums and discounts on financial instruments transferred to the Financial Instruments Adjustment Account (92) (92)Difference between accrued income from council tax and business rates and that required by statute to be paid over by Billing Authorities, transferred to the Collection Fund Adjustment Account (214) (214)Note c) Total (217) (217)

Total adjustments 213,898(note i) transfer from capital grants unapplied reserve -

213,898 Total adjustments between accounting and funding basis under statute



3 Unusable Reserves Unusable Reserves – Group

31 March Movement 31 March 2019 2020£'000 £'000 £'000

Revaluation Reserve (59,544) (41,871) (101,415) 3a

Capital Adjustment Account (110,813) 29,869 (80,944) 3b

Pensions Reserve 3,793,830 (199,935) 3,593,895 3c

Accumulated Absences Account 4,197 143 4,340 3d

Collection Fund Adjustment Account (1,802) 689 (1,113) 3e

Financial Instrument Adjustment Account (316) 997 681 3f

3,625,552 (210,108) 3,415,444

Not

e

Unusable Reserves – PCC

31 March Movement 31 March 2019 2020£'000 £'000 £'000

Revaluation Reserve (59,544) (41,871) (101,415) 3a

Capital Adjustment Account (110,813) 29,869 (80,944) 3b

Collection Fund Adjustment Account (1,802) 689 (1,113) 3e

Financial Instrument Adjustment Account (316) 997 681 3f

(172,475) (10,316) (182,791)

Not

e

3a Revaluation Reserve The Revaluation Reserve records the accumulated gains on assets arising from increases in the value of its Property, Plant and Equipment Assets. The balance is reduced when assets with accumulated gains are:-

Revalued downwards or impaired and the gains are lost;

Used in the provision of services and the gains are consumed through depreciation, or

Disposed of and the gains are realised The reserve contains only revaluation gains accumulated since 1 April 2007, the date that the reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account.

2018/19 £'000

2019/20 £'000

(61,329) (59,544)(2,630) (43,858)

3,116 585 1,299 1,402

(59,544) (101,415)

Balance at start of year Revaluations during year Disposal of revalued assets

Balance at end of year Depreciation of revaluations



3b Capital Adjustment Account The Capital Adjustment Account absorbs the timing differences arising from the different arrangement for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling posts from the Revaluation Reserve to convert fair value figures to a historical cost basis). The account is credited with the amounts set aside by the Commissioner as finance for the costs of acquisition, construction and enhancement. The account contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date the Revaluation Reserve was created to hold such gains.



Note 4 provides details of the source of all the transactions posted to the account, apart from those involving the Revaluation Reserve.

2018/19 £'000

2019/20 £'000

2019/20 £'000

(106,413) (110,813)

15,895 •

7,594

53 • 211 2,169 • 32,376

7,309 •

1,736

25,426 41,917 (4,415) (1,987)21,011 39,930

(7,128)•

(3,801)

(5,781)•

(3,270)

(11,372)•

(1,214)

(1,190)•

(1,777)

0 •

-

(25,471) (10,062)60 1

(110,813) (80,944)

Charges for depreciation and impairment of non-current assets

Statutory provision for the financing of capital investment charged against the General Fund balance

Use of the Capital Receipts Reserve to finance new capital expenditure

Voluntary provision for the financing of capital investment charged against the General Fund balance

Use of the Capital (Revenue Contributions) Reserve to finance new capital expenditure

Revenue expenditure funded from capital under statute

Sub-Total

Capital financing applied in the year:

Balance at 1 April

Balance at 31 March

Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement:

Adjusting amounts written out of the Revaluation ReserveNet written out amount of the cost of non-current assets consumed in the year

Sub-TotalWrite-down of capital debtors

Revaluation losses on Property, Plant and Equipment

Amounts of non-current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement that have been applied to capital financing



3c Pensions Reserve The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions. The Chief Constable accounts for post-employee benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investments returns on any resources set aside to meet the costs. However, statutory arrangements require benefits to be financed as the Chief Constable makes employer’s contributions to pension funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall in the resources the Chief Constable has set aside to meet the benefits earned by past and current employees. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

2018/19 £'000

2019/20 £'000

3,576,427 Balance at start of year 3,793,830

3,400 Actuarial losses/(gains) on pensions assets and liabilities (323,506)

258,303 Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement

176,218

(44,300) Employer's pension contributions and direct payments to pensioners payable in the year (52,647)

3,793,830 Balance at end of year 3,593,895 3d Accumulated Absences Account The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year (e.g. annual leave entitlement carried forward at 31 March). Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the account. 3e Collection Fund Adjustment Account The Collection Fund Adjustment Account manages the differences arising from the recognition of precept income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers compared with the statutory arrangements for paying across amounts to the General Fund from the Billing Authorities’ Collection Funds.



3f Financial Instrument Adjustment Account The change in fair value of strategic pooled investment funds debited or credited to the provision of services are reversed out of the General Fund balance to this adjustment account in the Movement in Reserves Statement.

4 Usable Reserves This note identifies the movement on the General Fund Balance, earmarked general fund (revenue) reserves, other revenue reserves and capital reserves. These are the total of the Usable Reserves shown on the Balance Sheet.



Balance 1 April 2018

Movement in 2018/19

Balance 31 March 2019

Movement in 2019/20

Balance 31 March 2020

£'000 £'000 £'000 £'000 £'000 Not

e

Revenue ReservesA. General Fund Balance (10,898) 108 (10,790) (8,159) (18,949) a

B. PCC Earmarked Revenue ReservesFully committed to Existing Spend ProgrammesCarry Forward Reserve (5,742) (1,121) (6,863) 6,548 (315) bEquipment Reserve (1,000) - (1,000) 1,000 - cESMCP Reserve - (7,000) (7,000) 7,000 - dEstates Reserve - (10,224) (10,224) eIT Services Reserve - (12,979) (12,979) fLaboratory Reserve (153) - (153) 153 - gReplacement Programme Reserve - (2,154) (2,154) hRevenue Grants Unapplied (1,062) (48) (1,110) 1,110 - i

(7,957) (8,169) (16,126) (9,546) (25,672)Departmental/Trading ReservesForfeit Reserve - (803) (803) (123) (926) jNetley Business Plan (245) (43) (288) 29 (259) kProperty Act Reserve - (69) (69) 69 - lSafer Roads Reserve - (2,124) (2,124) 354 (1,770) m

(245) (3,039) (3,284) 329 (2,955)Risk ReservesInsurance Reserve (1,477) - (1,477) - (1,477) n

(1,477) - (1,477) - (1,477)Corporate ReservesCommissioner's Reserve (3,174) 2,550 (624) (264) (888) oPerformance Reserve (1,204) 780 (424) 424 - pTransformation Reserve (38,561) 14,704 (23,857) 4,865 (18,992) q

(42,939) 18,034 (24,905) 5,025 (19,880)

(52,618) 6,826 (45,792) (4,192) (49,984)

C. Other Earmarked Revenue ReservesACRO General Reserve (7,014) 2,622 (4,392) 892 (3,500) rACRO Surety (4,000) - (4,000) (4,000) sAVCIS Surety (346) - (346) 20 (326) t

(11,360) 2,622 (8,738) 912 (7,826)

(74,876) 9,556 (65,320) (11,439) (76,759)

Capital Reserves- - - - -

Capital Receipts Reserve - - - - -

(1,048) (1,182) (2,230) 2,230 - u

(1,048) (1,182) (2,230) 2,230 -

Total Usable Reserves (75,924) 8,374 (67,550) (9,209) (76,759)

Total Earmarked Revenue Reserves Available

Capital Grants Unapplied

Capital (Revenue Contributions) Reserve

Total Revenue Reserves and Balances

Total Capital Reserves and Balances



Earmarked revenue reserves are held by the Commissioner for the following purposes:

a. The General Fund Balance is the main reserve held to manage unidentified and unforeseen risk;

b. The Carry Forward Reserve is for approved budget carry forwards where expenditure has been committed but not yet spent;

c. The Equipment Reserve holds funds available to offset the impact of large-scale equipment replacement such as the need to replace body armour when the warranty for body armour expires. This was consolidated into the Replacement Programme Reserve in 2019/20;

d. The ESMCP Reserve holds funds set aside for the delivery of the Emergency Services Mobile Communication Programme. This was consolidated into the IT Services Reserve in 2019/20;

e. The Estates Reserve holds revenue funds for a number of future Estates programmes such as large repairs and maintenance projects, future potential dilapidations costs, Isle of Wight capital programme and Estate Change Programme;

f. The IT Services Reserve holds funds set aside for IT refresh programmes (laptops, phones, BWV and servers), IT projects and the delivery of ESMCP;

g. The Laboratory Reserve holds funds available to pay for renewal of equipment as part of a joint scheme with Hampshire County Council. This was consolidated into the Replacement Programme Reserve in 2019/20;

h. The Replacement Programme Reserve holds funds available to offset the impact of large-scale equipment replacement (such as body armour and laboratory equipment) and vehicles;

i. The Revenue Grants Unapplied reserve holds grants for which there are no outstanding conditions but where the expenditure has not been incurred at year-end;

j. The Forfeit Reserve holds any surplus generated from confiscated money and is ring-fenced for activities relating to the prevention or detection of drug-related crime;

k. The Netley Business Plan holds any surplus generated from the use of the Netley site for functions such as weddings and is ring-fenced for subsequent reinvestment in the site;

l. The Property Act Reserve holds any surplus from the sale of confiscated property and is ring-fenced for purchases relating to property and evidence storage. It was consolidated into the Forfeit Reserve in 2019/20;

m. The Safer Roads Reserve holds any surplus from safer roads initiatives and will be used to further improve road safety;

n. The Insurance Reserve holds funds available to pay for claims that are not covered by the insurance contract;

o. The Commissioner’s Reserve holds amounts that are used specifically to support the Commissioner’s priorities and support delivery of the Police and Crime Plan;

p. The Performance Reserve holds funds used to pay for specific targeted medium-term operations such as Cyber Crime. It was consolidated into the Transformation Reserve in 2019/20;



q. The Transformation Reserve was specifically set up to recognise the significant investment required to deliver transformational change, support the investment requirements linked to technology development and digital initiatives, and to provide a buffer to help manage the budget in the medium term;

r. The ACRO General Reserve is the surplus of income over expenditure held on behalf of the Criminal Records Office to supplement ACRO income in future years.

s. The ACRO surety is a sum held to meet any liabilities if the ACRO service ceases or is transferred out of the Commissioner’s stewardship at short notice;

t. The AVCIS surety is a sum held to meet any liabilities if the ACPO Vehicle Crime Intelligence Service ceases or is transferred out of the Commissioner’s stewardship at short notice;

u. The Capital (Revenue Contributions) Reserve holds funds that have been set aside from within the annual revenue budget to pay for capital schemes. This reserve will collect funds on a temporary basis as the funds will usually then be paid out in the next one or two years to cover the cost of a capital scheme.

5 Other operating income/expenditure

2018/19 2019/20£'000 £'000

2,533 Levies to National Police Services -(56,621) Home Office Police Pension Fund Top-up Grant (51,278)56,621 Transfer of Home Office Grant to the Police Pension Fund 51,278

2,533 - 6 Financing and investment income and expenditure 6.1 Financing and investment income and expenditure – Group

2018/19 2019/20£'000 £'000

1,336 Interest payable and similar charges 1,30691,680 Pensions interest cost and expected return on pension assets 89,990

(353) Interest receivable and similar income (731)(333) Dividends received

(92) Pooled investments (gain) or loss 9974 Expected credit losses 6

(70) Change in expected loss allowance for receivables92,172 91,568



6.2 Financing and investment income and expenditure – PCC

2018/19 2019/20£'000 £'000

1,336 Interest payable and similar charges 1,306(353) Interest receivable and similar income (731)(333) Dividends received -

(92) Pooled investments (gain) or loss 9974 Expected credit losses 6

(70) Change in expected loss allowance for receivables -492 1,578

7 Government Grants and other contributions – Group and Commissioner Government grants and third party contributions are recognised as income at the date that the Commissioner satisfies the conditions of entitlement to the grant or contribution. Grants and contributions which have outstanding conditions are carried in the Balance Sheet as creditors (receipts in advance). When conditions are satisfied, or where there are no conditions attached to the grant or contribution and there is reasonable assurance that the monies will be received and that the expenditure for which the grant has been given has been or will be incurred, the income is credited to the Comprehensive Income and Expenditure Statement as follows:

To the relevant service for revenue grants and contributions and capital grants used to fund revenue expenditure funded by capital under statute

To the Taxation and Non-Specific Grant Income section for non-ring-fenced revenue grants and contributions and all other capital grants and contributions.

Capital grants credited to the Comprehensive Income and Expenditure Statement, are reversed out of the General Fund in the Movement in Reserves Statement. Capital grants applied in the year are posted to the Capital Adjustment Account. Where the grant has yet to be used to finance capital expenditure, it is transferred to the Capital Grants and Contributions Unapplied Reserve. Amounts in the Capital Grants and Contributions Unapplied Reserve that are subsequently applied in future years will be transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure. Where revenue grants have been credited to the Comprehensive Income and Expenditure Statement but are yet to be used, they are transferred to an earmarked reserve in the Movement in Reserves Statement. Once used in subsequent years, they are transferred to the General Fund to fund the revenue expenditure. Most of the taxation and non-specific grant income is credited to the CIES of the Commissioner, and the majority of specific grants and contributions are recorded in the Chief Constable’s CIES. The table shows the analysis across the group:-



2018/19 2019/20£'000 £'000

(121,710) Council Tax Precept (139,282)(62,255) Formula funding (63,473)

(118,401) Police Grant (120,909)(12,944) Council tax legacy grant (12,944)(1,159) Government Grant to Finance Capital Expenditure (1,184)

(10,213) (30)

(326,682) (337,822)

2018/19 2019/20£'000 £'000

(496) Contributions to National Wildlife Crime Unit (ACRO) (301)(2,017) Counter-Terrorism Policing Grant (2,691)

(253) Cybercrime Grant (270)- Early Intervention Youth Funding (317)

(554) Home Office grants to ACPO Criminal Records Office (2,861)(120) Home Office Prevent grant -(406) Innovation Fund -

Learning development for police officers providing input in schools (150)(44) Local Criminal Justice Board funding -

Multi Agency Stalking Intervention Programme (185)(220) NHS Medical in custody grant -

Police Pension Grant (2,988)

(415)-

(2,289) Restorative Justice/Victims Support grant (2,602)Serious Violence Fund (1,260)Uplift Enablers Grant (747)Violence Reduction Units (880)

(1,122) Miscellaneous grants (29)(7,936) Total (15,281)

Credited to Services

Credited to Taxation and Non-Specific Grant Income

Other capital contributions

Total

Contributions to National Police Freedom of Information and Data Protection Unit (ACRO - formerly FOI Central Referral Unit)



2018/19 2018/19 2019/20 2019/20PCC CC PCC CC£'000 £'000 £'000 £'000

(121,710) - Council Tax Precept (139,282) -(62,255) - Formula funding (63,473) -

(118,401) - Police Grant (120,909) -(12,944) - Council tax legacy grant (12,944) -(1,159) - Government Grant to Finance Capital Expenditure (1,184) -

(10,213) - (30) -

(326,682) - (337,822) -

- (496) Contributions to National Wildlife Crime Unit (ACRO) - (301)- (2,017) Counter-Terrorism Policing Grant - (2,691)- (253) Cybercrime Grant - (270)- - Early Intervention Youth Funding (317)- (554) Home Office grants to ACPO Criminal Records Office - (2,861)- (120) Home Office Prevent grant - -- (406) Innovation Fund - -

- - - (150)- (44) Local Criminal Justice Board funding - -- - Multi Agency Stalking Intervention Programme - (185)- (220) NHS Medical in custody grant - -- - Police Pension Grant - (2,988)

-(415)

- -(2,289) - Restorative Justice/Victims Support grant (2,602) -

- - Serious Violence Fund - (1,260)- - Uplift Enablers Grant - (747)- - Violence Reduction Units - (880)- (1,122) Miscellaneous grants - (29)

(2,289) (5,647) Total (2,919) (12,362)

Credited to Services

Other capital contributions

Total

Credited to Taxation and Non-Specific Grant Income

Contributions to National Police Freedom of Information and Data Protection Unit (ACRO - formerly FOI Central Referral Unit)

Learning development for police officers providing input in schools



8 Officer and Staff Remuneration Employee Benefits The Chief Constable employs the majority of staff who previously were under the employment of the Commissioner. As a result, these accounts include all of the related IAS19 Employee benefits adjustments for those employees in the Local Government Pension Scheme (LGPS) and the Police Pension Schemes. Whilst a small number of staff work directly for the Commissioner on delivering his activities, on the grounds that any proportionate share of the IAS19 entries would not be material to the accounts, all of the LGPS IAS19 adjustments are contained in the Chief Constable’s accounts.

Benefits Payable During Employment

Short-term employee benefits are those due to be settled within 12 months of the year-end. They include such benefits as salaries, paid annual leave and flexitime for current employees and are recognised as an expense for services in the year in which employees render service to the Chief Constable. An accrual is made for the cost of holiday entitlements (or any form of leave, e.g. time off in lieu) earned by employees but not taken before the year-end which employees can carry forward into the next financial year. The accrual is made at the salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to Surplus or Deficit on the Provision of Services, but then reversed out through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs.



All Remuneration over £50,000 in bandings of £5,000 - Group The Accounts and Audit Regulations 2015 require the Commissioner to report on the number of employees who received remuneration totalling more than £50,000 in the year, grouped in bandings of £5,000. Employee costs - i.e. total remuneration - include salary and taxable allowances paid to officers and staff. It does not include employer pension contributions, nor does it show remuneration net of employees' pension contributions. Where appropriate, compensation for loss of employment is also included. The 2015 regulations define senior police officers for these purposes as being those with the rank of superintendent or above. The numbers also include people who are seconded to national roles but whose costs are reimbursed.

CC PCCGroup Total CC PCC

Group Total

263 4 267 301 2 303158 3 161 199 2 201

66 1 67 72 3 7517 - 17 10 - 10

7 1 8 8 - 88 - 8 6 1 7

13 - 13 10 - 105 - 5 11 - 114 - 4 3 - 32 1 3 1 - 1- - - - - -1 - 1 - - -- - - 1 - 1- - - - - -- - - - - -- - - - - -- - - - - -

Totals 544 10 554 622 8 630£190,000 - £194,999

£105,000 - £109,999

£135,000 - £139,999£120,000 - £124,999£115,000 - £119,999£110,000 - £114,999

2019/202018/19Number of employees Number of employees

£100,000 - £104,999£95,000 - £99,999

£75,000 - £79,999£80,000 - £84,999

£90,000 - £94,999£85,000 - £89,999

Remuneration Band

£50,000 - £54,999

£60,000 - £64,999

£70,000 - £74,999

£55,000 - £59,999

£65,000 - £69,999



Remuneration for relevant police officers and senior employees The Accounts and Audit Regulations 2015 consolidated regulations for the disclosure of the total remuneration package of those charged with the stewardship of the organisation, being senior employees or relevant police officers of the Commissioner. In Hampshire, the relevant police officer is the Chief Constable, who should be identified by name as well as post, regardless of their salary. However, the definition of senior employees for non-police officers is wider and covers those responsible for the strategic management of the organisation. Given the nature of the services provided by the Commissioner and the make-up of its strategic leadership team, the disclosure below includes all chief officers. Only relevant police officers (regardless of salary) and senior employees with a salary greater than £150,000 are named. The table below provides the relevant disclosure for 2019/20 and comparative information for 2018/19 is provided in the second table. Where there have been changes in personnel during the current and prior year the part year remuneration is shown on an individual basis over more than one line. This will mean that certain posts are not comparable. The tables show the distinction between the Office of the PCC and those included in the operating cost statement for the Chief Constable, although in reality all officers and staff are paid by the Commissioner.



2019/20 DisclosurePost holder information

Sal

ary,

fees

and

allo

wan

ces

Bon

uses

Exp

ense

s Al

low

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Com

pens

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Ben

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in K

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*

Oth

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(Pol

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offic

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only

)

Em

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er's

Pen

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co

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utio

ns

Tot

al R

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ion

incl

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cont

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ions

Not

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£ £ £ £ £ £ £ £Office of the PCC

PCC For Hampshire & Isle of Wight 86,700 - - - - - 13,959 100,659

Chief Exec (PCC) 100,397 - - - - 16,164 116,561-

Constabulary -Chief Constable - 1/4/2019 - 31/3/2020 Olivia Pinkney

189,685 - 1,353 - - - 57,178 248,216

Deputy Chief Constable - 1/4/2019 - 31/3/2020

140,654 - - - - - 42,905 183,559

Assistant Chief Constable - Local Policing - 1/4/2019 - 31/3/2020

119,634 - 1,077 - - - 35,690 156,401

Assistant Chief Constable - Crime, Criminal Justice and Intelligence - 1/4/2019 - 31/3/2020

116,131 - - - - - 35,690 151,821

Assistant Chief Constable - Operations - 1/4/2019 - 31/3/2020

117,770 - - - - - 35,690 153,460

Assistant Chief Constable - 12/8/2019 - 31/3/2020

68,763 - - - - - 20,305 89,068

939,734 - 2,430 - - - 257,581 1,199,745 1,2

* benefits in kind will be added after the 6 July statutory deadline for issuing this information for tax purposes.

Note 1: The Chief Finance Officer for the PCC is employed by Hampshire County Council as part of the shared services arrangement. This is a part-time role and the Officer providing this function is included within the remuneration details disclosed by Hampshire County Council. A recharge is made to the PCC from the County Council in respect of the time and cost of the statutory role carried out by the Chief Finance Officer. This charge was £65,658 (This figure include all employers on costs)

Note 2: The Chief Finance Officer for Hampshire Constabulary is employed by Hampshire County Council as part of the shared services arrangement. The Officer providing this function is included within the remuneration details disclosed by Hampshire County Council. A recharge is made to the Constabulary from the County Council in respect of the cost of the Chief Finance Officer. This charge was £117,003 (This figure includes all employer on costs).



2018/19 DisclosurePost holder information

Sal

ary,

fees

and

allo

wan

ces

Bon

uses

Exp

ense

s Al

low

ance

Com

pens

atio

n fo

r los

s of

em

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men

t

Ben

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in K

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Oth

er p

aym

ents

(Pol

ice

offic

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only

)

Em

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Pen

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co

ntrib

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ns

Tot

al R

emun

erat

ion

incl

udin

g pe

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ns

cont

ribut

ions

Not

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£ £ £ £ £ £ £ £Office of the PCC

PCC For Hampshire & Isle of Wight 86,558 - - - - - 13,070 99,628

Chief Exec (PCC) 99,402 - 13 - - 15,010 114,425-

Constabulary -Chief Constable - 1/4/2018 - 31/3/2019 Olivia Pinkney

193,606 - - - - 36,302 229,908

Deputy Chief Constable - 1/4/2018 - 31/3/2019

137,550 - 900 - 3,511 - 28,818 170,779

Acting Assistant Chief Constable - Local Policing - 1/4/2018 - 5/7/2018 30,715 - - - - - 4,608 35,323

Assistant Chief Constable - Local Policing - 1/4/2018 - 31/3/2019

112,887 - 996 - 4,903 - 23,086 141,872

Assistant Chief Constable - Crime & Criminal Justice - 1/4/2018- 31/3/2019

112,621 - - - 2,980 - 22,683 138,284

Assistant Chief Constable - Joint Operations - 1/4/2018 - 31/3/2019 118,518 - - - 1,561 - 24,682 144,761 1,2

891,857 - 1,909 - 12,955 - 168,259 1,074,980

Note 1: The Chief Finance Officer for the PCC is employed by Hampshire County Council as part of the shared services arrangement. This is a part-time role and the Officer providing this function is included within the remuneration details disclosed by Hampshire County Council. A recharge is made to the PCC from the County Council in respect of the time and cost of the statutory role carried out by the Chief Finance Officer. This charge was £62,804 (This figure include all employers on costs)

Note 2: The Chief Finance Officer for Hampshire Constabulary is employed by Hampshire County Council as part of the shared services arrangement. The Officer providing this function is included within the remuneration details disclosed by Hampshire County Council. A recharge is made to the Constabulary from the County Council in respect of the cost of the Chief Finance Officer. This charge was £113,865, (This figure includes all employer on costs).



9 Termination Benefits

Termination benefits are amounts payable as a result of a decision by the Chief Constable to terminate an employee’s employment before the normal retirement date or an employee’s decision to accept voluntary redundancy and are charged on an accruals basis to the appropriate service in the Comprehensive Income and Expenditure Statement at the earlier of when the authority can no longer withdraw the offer of those benefits or when the authority recognises costs for a restructuring.

Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund balance to be charged with the amount payable by the Chief Constable to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end.

Exit Packages in Bands of £20,000 – Group

Exit Package cost band (including special

payments)

2018/19 2019/20 2018/19 2019/20 2018/19 2019/20 2018/19 2019/20No. No. No. No. No. No. £'000 £'000

£0 - £20,000 - 4 20 1 20 5 165 46 £20,001 - £40,000 - - 1 1 1 1 21 20 £40,001 - £60,000 - - - - - - - - £60,001 - £80,000 - - - - - - - - £80,001 - £100,000 - - - - - - - - £100,001 - £150,000 - - - - - - - - Totals - 4 21 2 21 6 186 66

Number of compulsory

redundancies

Number of other departures

agreed

Total number of exit packages by cost band

Total cost of exit packages in each band

In addition to the payments made to staff leaving the organisation, the Chief Constable also made payments to the Local Government Superannuation Scheme which it bears as the employer for the early retirement of eligible staff who are made redundant. Charges to the Comprehensive Income and Expenditure Statement to cover the actual or expected payments due amounted to £85k in 2019/20 (£66k in 2018/19).



10 External audit costs The Group has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections and to any non-audit services provided by the Commissioner's external auditors:-

2018/19 2019/20£'000 £'000

32 32

- -

14 14

- -46 46

Fees payable to EY with regard to external audit services carried out by the appointed auditor for the year

Police and Crime Commissioner:

Chief Constable:

Other services provided by EY

Other services provided by EY

Fees payable to EY with regard to external audit services carried out by the appointed auditor for the year

Fees paid by the PCC and the Chief Constable in 2019/20 were in line with the scale fee.

11 Nature of Expenses - Group

As disclosed in the note to the CIES, during 2019/20 the service segments used by the PCC and Constabulary were updated and the new segments are presented. The prior year figures disclosed in the nature of expenses note have therefore also been updated to reconcile to the new CIES presentation. The Cost of Services includes the following items of income and expenditure:

Expenditure in the CIES (restated) Note

Expenditure in the CIES

£'000 £'000

384,293 Employee Benefit Expenses a 272,928117,723 Other Service Expenses b 192,22915,948 Depreciation and Impairment c 7,805

517,964 Total Expenditure 472,962

(36,782) Grants, contributions and reimbursements (52,577)(24,640) Fees, charges and other service income (24,020)(61,422) Total Income (76,597)

456,542 Net Cost of Services 396,365

2018/19 2019/20

a) Employee benefit expenses include pay, employer national insurance contributions, employer pension contributions and other employee benefits. Accounting adjustments



are then made under IAS19 so that the expenditure in the CIES reflects the current service cost of the benefit granted in the period, rather than the payments made.

b) Other service expenses include costs relating to premises, transport, supplies and services. An accounting adjustment is made so that the charge to the CIES also includes revenue expenditure charged to capital under statute (REFCUS).

c) Depreciation and impairment charges are made to the CIES to reflect the use of fixed assets during the period. These are not chargeable to the general fund.

Income received from external customers is analysed by service in the table below:

2018/19 2019/20£'000 £'000

(24,174) Operational policing services (9,063)(467) Office of the Police and Crime Commissioner (1)

- Police and Crime Commissioner - Commissioning -- Police and Crime Commissioner - Estate (264)- Other items not allocated to services (14,692)

(24,641) Total income from external customers analysed by service (24,020)

Nature of expenses – PCC

As disclosed in the note to the CIES, during 2019/20 the service segments used by the PCC and Constabulary were updated and the new segments are presented. The prior year figures disclosed in the nature of expenses note have therefore also been updated to reconcile to the new CIES presentation. The Cost of Services includes the following items of income and expenditure:

Expenditure in the CIES (restated) Note

Expenditure in the CIES

£'000 £'000

2,003 Employee Benefit Expenses a 1,97421,465 Other Service Expenses b 55,65415,948 Depreciation and Impairment c 7,80539,416 Total Expenditure 65,433

(2,482) Grants, contributions and reimbursements (3,841)(466) Fees, charges and other service income (265)

(2,948) Total Income (4,106)

36,468 Net Cost of Services 61,327

2018/19 2019/20



a) Employee benefit expenses include pay, employer national insurance contributions, employer pension contributions and other employee benefits.

b) Other service expenses include costs relating to premises, transport, supplies and services. An accounting adjustment is made so that the charge to the CIES also includes revenue expenditure charged to capital under statute (REFCUS).

c) Depreciation and impairment charges are made to the CIES to reflect the use of fixed assets during the period. These are not chargeable to the general fund.

Income received from external customers is analysed by service in the table below:

2018/19 2019/20£'000 £'000

(467) Office of the Police and Crime Commissioner (1)- Police and Crime Commissioner - Commissioning -- Police and Crime Commissioner - Estate (264)

(467) Total income from external customers analysed by service (265) 12 Related Parties The Commissioner and the Group are required to disclose material transactions with related parties - bodies or individuals that have the potential to control or influence the Commissioner or to be controlled or influenced by the Commissioner. Disclosure of these transactions allows readers of the accounts to assess the extent to which the Commissioner might have been constrained in its ability to operate independently or might have secured the ability to limit another party's ability to bargain freely with the Commissioner. In this disclosure, the Chief Constable, as a wholly-owned subsidiary, is included and the note covers the Group as a whole. The UK Government exerts significant influence through legislation and grant funding. The value of grants received is shown in the Income and Expenditure Account and further details of specific additional grants received are given in note 7. The Chief Constable makes contributions to pension schemes for both uniformed officers and non-uniformed staff. The Police Pension Schemes are administered by the Chief Constable and the Chief Constable paid £35.3m to the Police Pension Fund as contributions in respect of existing officers and those retiring due to ill-health in the year (£29.1m in 2018/19). The Local Government Pension Scheme is administered by Hampshire County Council and the Chief Constable made employer's contributions of £17.1m in 2019/20 (£15.8m in 2018/19). The Chief Finance Officer (CFO) to the Commissioner and the CFO to the Chief Constable are both employed by Hampshire County Council. The governance arrangements of the Commissioner and Chief Constable and the independence and professional status of each CFO, ensure that these relationships are not compromised. The Code also requires members of the Office of the Police and Crime Commissioner, Chief Officers in the Constabulary and certain other senior officers to declare if there were any



related party (e.g. close family or business associates) transactions due to their ability to influence spending decisions. There were no related party transaction disclosures in 2019/20 (none in 2018/19). The Commissioner and Chief Constable are party to a number of joint working arrangements, providing a wide range of operational policing and business support services both within Hampshire and throughout the South East Region. The key collaborations are as follows:-

Activity Partners Lead/ Host

PCC share

of costs £m

Joint working for support services

Hampshire County Council (HCC), Hampshire Fire and Rescue Services (HFRS) HCC 7.3

Joint ICT/Information Management Department Thames Valley Police (TVP) TVP

18.3

South East Organised Regional Organised Crime Unit (SEROCU)

South East Region Forces (TVP, Surrey, Sussex) TVP

3.2

Joint Operations Unit Thames Valley Police (TVP) TVP 25.0 In all of these, Governance arrangements are in place which means that each party can influence the work and priorities of each activity and will have a role in budget setting and overall strategic direction. Where there is a host organisation, they will have day to day operational responsibility and may recruit key post holders. They may also employ the staff working across the partnership area. Where key decisions are made, however, this is generally by a simple majority and no force, authority or combination of such would have de facto control or joint control of the partnership. All of these partnerships have been reviewed in terms of whether they should be part of the group accounts and it has been concluded that they do not. Consequently, the income and expenditure is reported in the single entity accounts of the Commissioner and Chief Constable as appropriate. 13 Capital financing requirement The Commissioner’s borrowing for capital purposes is controlled under the CIPFA Prudential Code for Capital Finance in Local Authorities. The total borrowing is expressed as the Capital Financing Requirement (CFR). The total amount of capital expenditure incurred in the year is shown in the table below together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed. The CFR is analysed in the second part of this note



Revenue Expenditure Funded From Capital Under Statute Expenditure incurred during the year that may be capitalised under statutory provisions but that does not result in the creation of a non-current asset has been charged as expenditure to the relevant service in the Comprehensive Income and Expenditure Statement in the year. Where it is determined that the cost of this expenditure will be met from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement from the General Fund to the Capital Adjustment Account then reverses out the amounts charged so that there is no impact on the level of council tax.

2018/19 2019/20£'000 £'000

50,066 58,062

5,884 5,083 25,413 2,297

2,169 794

(7,128) (3,801)(11,371) (1,214)

- -(5,781) (3,270)(1,190) (1,777)

58,062 56,174

7,996 (1,888)

7,996 (1,888)

Operational assets

Revenue Expenditure funded from capital under statute

Capital investment

Increase/ (decrease) in Capital Financing Requirement

Increase/ (decrease) in underlying need to borrow

Non-operational assets

Sources of finance Capital receipts Government grants and contributions Donated assets

Explanation of movements in year

Use of reserves (Revenue contributions to capital) Sums from revenue (Minimum revenue provision - MRP)

Capital financing and expenditure

Closing Capital Financing Requirement

Opening Capital Financing Requirement

£8.3m of capital expenditure was on property, plant and equipment and vehicles as shown above. The expenditure on non-operational assets in 2019/20 relates to the continuing expenditure on the programme to rationalise operational property across the force area, to provide neighbourhood offices for safer neighbourhood teams for the relocation of the operational headquarters for the Constabulary and to purchase and prepare sites for Police Investigation Centres. Once complete, these non-operational assets will be reclassified and will become operational (i.e. used in the delivery of services). Under the Prudential Code arrangements, the Commissioner is permitted to borrow money to finance capital expenditure as long as the borrowing is prudent, affordable and sustainable. No new borrowing was taken out in 2019/20 (Nil in 2018/19).



Minimum Revenue Provision for the repayment of debt The Commissioner is required by law to make a 'minimum revenue provision' (MRP) for the repayment of debt. The regulations in place prior to 2007/08 required this MRP to be set at 4% of the Commissioner's capital financing requirement less the 'relevant amount', which is a statutory measure of the Commissioner’s net indebtedness to fund capital expenditure. The Commissioner has adopted the policy first approved in June 2008 to calculate the minimum revenue provision for the repayment of debt - which is a statutory charge to the Comprehensive Income and Expenditure Account - on the basis of the previous regulations in respect of capital expenditure supported by Government grant. The MRP for all unsupported borrowing will be based on the asset life.

14 Leases

Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All ther leases are classified as operating leases.

Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification.

Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets.

14a The Commissioner as Lessee

Finance Leases

Property, plant and equipment held under finance leases is recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred.

Lease payments are apportioned between:

a charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liability, and

a finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).

Property, Plant and Equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the Commissioner at the end of the lease period).



The Commissioner has one building which was originally acquired under a finance lease under IAS17. No other assets have been identified as being acquired under finance leases. This operational building is carried as property, plant and equipment in the Balance Sheet and is subject to depreciation in accordance with its class of asset. A premium was paid when a 999-year lease for the building commenced in March 2001 and a peppercorn rent is payable for the remainder of the lease term. The minimum lease payment is not recognised as a long-term liability in the Commissioner's accounts due to its immateriality. The annual lease payment is recognised as a revenue expense. The net book value of the property at 31 March 2020 was £4.199m (£4.301m at 31 March 2019).

Operating Leases

The Commissioner leases a number of operational buildings. Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a rent-free period at the commencement of the lease). The expenditure charged to the net cost of services in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was £3.184m (£2.946m in 2018/19).

The future minimum lease payments due under non-cancellable leases in future years are: 31 March 2019 31 March 2020

£'000 £'0002,862 Not later than one year 3,311

11,223 Later than one year and not later than five years 8,60149,675 Later than five years 51,07663,760 Total 62,988

14b The Commissioner as Lessor

Where the Commissioner grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income. No significant property, plant, equipment or other assets are leased, either as finance leases or operating leases.



15 Property, Plant and Equipment (PP&E) movements – Group and Commissioner

Assets that have a physical substance and are held for use in the provision of services or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment. PP&E assets are shown in the balance sheet at their written-down value after taking account of depreciation. Recognition All expenditure above the de minimis limit of £10,000 (£6,000 for vehicles) on the acquisition, creation or enhancement of property, plant and equipment is capitalised on an accruals basis. Expenditure that maintains, but does not extend, the previously assessed standards of performance of the asset (e.g. repairs and maintenance) is charged to the relevant service area within the Comprehensive Income and Expenditure Statement as it is incurred. Measurement PPE assets are initially measured at cost, comprising all expenditure that is directly attributable to bringing the asset into working condition for its intended use. Assets are then carried in the Balance Sheet using the following measurement bases:

Operational Land and Buildings - current value, determined as the amount that would be paid for the asset in its existing use. Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of fair value.

Surplus Land and Buildings – at fair value in highest and best use, the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

Vehicles, Plant and Equipment are measured at depreciated historical cost (as this is not materially different from the current value).

Assets under construction – Historic cost (not subject to depreciation until operational);

PPE assets included in the Balance Sheet at fair value or current value (i.e. land and buildings) are re-valued where there have been material changes in the value, or a change in use, and as a minimum every five years. Increases in valuations are matched by credits to the Asset Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the relevant service area within the Comprehensive Income and Expenditure Statement where they arise from the reversal of an impairment loss previously charged to the service area. The Asset Revaluation Reserve only contains revaluation gains recognised since 1 April 2007, the date of its formal implementation. Gains arising before that date form part of the Capital Adjustment Account. Impairment Decreases in value (due to either physical impairment or market prices) are either charged to the Asset Revaluation Reserve (to the extent that it has any balance relating to the



specific asset) or to the relevant service area within the Comprehensive Income and Expenditure Statement. Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised. However, revaluation losses and subsequent reversals are not permitted by statutory arrangements to impact on the General Fund Balance and therefore any gains or losses are reversed out of the General Fund Balance (in the Movement in Reserves Statement) and are transferred to the Capital Adjustment Account. Depreciation Depreciation is defined as the measure of the wearing out, consumption, or other reduction in the useful economic life of a fixed asset. Depreciation is charged on all assets, with the exception of land where no depreciation is charged. Where is it charged, depreciation is calculated on the following basis:- Property, plant and equipment assets (PP&E), with the exception of vehicles, are

depreciated on a straight line basis over the useful life of the property as estimated by the valuer. Buildings have a half year depreciation in the year of acquisition and sale.

Vehicles are depreciated on a straight line basis over the useful life of the asset less an estimated residual value which is excluded from this calculation. Where a vehicle has reached the end of its expected life but the vehicle is retained, the residual value is revised and this forms the depreciation charge for the year. Vehicles have a full year of depreciation in the year of purchase but are not depreciated in the year of sale;

Intangible non-current assets are amortised on a straight line basis and no residual value is assumed unless this can be measured reliably.

The above methodologies reflect the relative speed of depreciation of buildings and vehicles. The useful lives of land and buildings are advised by a qualified valuer on an asset by asset basis. Buildings have variable asset lives, with most operational buildings having assumed to have a useful life of 90 years at the point of construction, and dwellings having a life of 61 years. New buildings are valued at the point of completion and the asset life for accounting purposes assessed at that time. Useful lives of vehicles are advised by the Force's Transport Department for each individual vehicle. Vehicles are typically given an asset life of between 3 and 5 years, although this represents the extent of their useful life for operational purposes and the residual value represents an estimate of their economic value at the anticipated point of disposal. IT and other short-life equipment is generally assigned a useful economic life of between 5 and 10 years. Useful lives of other assets are advised by a suitably qualified individual. There are no changes to the methodology. Depreciation is charged to the relevant revenue service area within the Comprehensive



Income and Expenditure Statement. However, depreciation charges are not permitted by statutory arrangements to have an impact on the General Fund Balance and therefore all depreciation charges are reversed out of the General Fund Balance (in the Movement in Reserves Statement) and are transferred to the Capital Adjustment Account. Revaluation gains are also depreciated, with an amount equal to the depreciation between current value depreciation charged on assets and the depreciation which would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

Componentisation

The Code recognises that an asset may consist of several different and physical components. If an item of Property, Plant and Equipment (PP&E) comprises two or more significant components with substantially different useful lives, then each component is treated separately for depreciation purposes – i.e. as if each component were a separate in its own right – and depreciated over its individual useful life.

In accordance with the Code, the carrying amount of a replaced or restored component is de-recognised with the carrying amount of the new component being recognised. This accounting treatment applies regardless of whether the replaced part had been depreciated separately. Where it is not possible to determine the carrying amount of the replaced part, the cost of the new part is used as an indication of the cost of the replaced part at the time it was acquired or constructed.

For the purposes of componentisation, the Commissioner has applied a de minimis limit for each individual component of £500,000 and 20% of the overall asset cost. Thus, component assets that are part of a larger asset which has a value of at least £2.5m and the estimated cost of the component is at least £500,000 and 20% of the cost of the larger asset will be recorded and depreciated separately if that component has a materially different useful life and/or method of depreciation to the main asset. Items below these limits are not considered to be material.

Where expenditure on refurbishing or replacing elements of PP&E is incurred, and which is below the materiality threshold but which is properly recorded as being capital, the written down value of the replaced or refurbished element of the main asset will be written out of the asset register to avoid double-counting of expenditure which does not add value.

Any Revaluation Reserve balances associated with componentised assets will be attributed to the building component (s) as it is considered unlikely that plant and equipment components will give rise to revaluation gains and losses independently of the structure of the building. However, the plant and equipment components may be subject to impairment. Disposals and assets held for sale When a material PPE asset is to be disposed of, and meets all of the criteria of an asset held for sale, it is reclassified as Assets Held for Sale. If the carrying amount at the time of reclassification is higher than the fair value less costs to sell the asset, then the asset held for sale will be impaired. This impairment is charged to other costs in the Comprehensive



Income and Expenditure Statement. Assets that are being abandoned or scrapped are written out without being reclassified.

When the asset is disposed of, or decommissioned, the carrying value of the asset is written out to the Other Operating Income and Expenditure line within the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. Any revaluation gains accumulated for the asset in the Asset Revaluation Reserve are written out to the Capital Adjustment Account by way of a transfer between the accounts.

Amounts received in excess of £10,000 are categorised as capital receipts and are credited to the other operating expenditure line within the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. They are then appropriated to the Capital Receipts Reserve from the General Fund Balance within the Movement in Reserves Statement and then can only be used for new capital investment or set aside to reduce the County Council’s underlying need to borrow (the capital financing requirement). Property, Plant and Equipment Movement on balances This statement summarises capital expenditure incurred on property, plant and equipment assets which will be of use to the Group in future financial years. Future and current taxpayers will benefit from these assets and such costs are therefore not necessarily charged to the revenue account in the year that the asset is acquired. All non-operational assets are assets under construction. When these are completed and brought into use the asset is reclassified. As there is no distinction between the Group and the Commissioner, there is no separate statement for the Commissioner. Additionally, as the Chief Constable does not hold any assets, there is no requirement to produce a statement for that entity.



Movement on balances 2019/20

£'000 £'000 £'000 £'000 £'000 £'000Cost or valuationAt 31 March 2019 180,337 20,394 21,025 30,752 12,431 264,939

3,740 1,298 2,297 45 7,380 Donations - - - - - -

- (1,667) - - - (1,667)- - (13,022) - - (13,022)- - - (380) (380)

441 277 - (32,300) - (31,582)226,757 20,302 8,003 749 12,096 267,907

At 31 March 2019 (7,691) (12,384) (17,941) - (156) (38,172)(4,159) (1,663) (1,605) - (167) (7,594)

- 1,281 - - 1,281 - - 13,022 - - 13,022 - - - - 4 4

- - - -

(10,356) (12,766) (6,524) - (319) (29,965)

Net Book Value216,401 7,536 1,479 749 11,777 237,942 172,646 8,010 3,084 30,752 12,275 226,767

Revaluation increases/(decreases) recognised in the Revaluation Reserve

(110)

Derecognition - Other

Revaluation increases/(decreases) recognised in the Surplus/Deficit on the Provision of ServicesDerecognition - Disposals

(110) -

42,349 -

-- - -

1,494

-

- --

-

1,494

- - 42,349

- -

-

At 31 March 2019

Assets reclassified (to)/from held for sale

Derecognition - DisposalsDerecognition - Other

At 31 March 2020

Other movements in depreciation and impairmentAt 31 March 2020

Assets reclassified (to)/from held for sale

Other movements in cost or valuation

At 31 March 2020

Accumulated depreciation and Impairment

Depreciation Charge

Depreciation written out on revaluation

Depreciation written out to the Surplus/Deficit on the Provision of Services

Tota

l Pr

oper

ty,

Plan

t and

Eq

uipm

ent

Additions in year

Furn

iture

and

Eq

uipm

ent

Asse

ts u

nder

co

nstru

ctio

n

Surp

lus

Asse

ts

Land

and

Bu

ildin

gs

Vehi

cles

and

Pl

ant



Movement on balances 2018/19

£'000 £'000 £'000 £'000 £'000 £'000Cost or valuationAt 31 March 2018 177,527 19,986 15,595 12,445 17,162 242,715

4,026 1,857 25,413 - 31,296 Donations

- (1,901) - - (7,161) (9,062)- - - - - -- - - - (1,550) (1,550)

(2,487) 452 5,430 (7,106) 3,711 -180,337 20,394 21,025 30,752 12,431 264,939

At 31 March 2018 (4,948) (11,883) (8,190) - (245) (25,266)(3,841) (2,088) (9,751) - (215) (15,895)

- - - - - -- 1,587 - - 166 1,753 - - - - 23 23

121 - - - (121) -

(7,691) (12,384) (17,941) - (156) (38,172)

Net Book Value172,646 8,010 3,084 30,752 12,275 226,767 172,579 8,103 7,405 12,445 16,917 217,449

Tota

l P

rope

rty,

Pla

nt a

nd

Equ

ipm

ent

Additions in year

Furn

iture

and

E

quip

men

t

Ass

ets

unde

r co

nstr

uctio

n

Sur

plus

A

sset

s

- - 316

(7) -

Revaluation increases/(decreases) recognised in the Revaluation Reserve

Land

and

B

uild

ings

Veh

icle

s an

d P

lant

1,278 -

(54)

1,594

At 31 March 2018

Assets reclassified (to)/from held for saleDerecognition - Disposals

At 31 March 2019

Other movements in depreciation and impairmentAt 31 March 2019

Other movements in cost or valuation

At 31 March 2019Accumulated depreciation and Impairment

Depreciation Charge

Depreciation written out to the

Depreciation written out on revaluation

Derocognition - OtherAssets reclassified (to)/from held for sale

Derecognition - Disposals

(47)Revaluation increases/(decreases) recognised in the Surplus/Deficit on the Provision of Services

- -

- - 236

Depreciation written out to the Surplus/Deficit on the Provision of Services

-977 1,213 -

Capital commitments As at 31 March 2020 the Commissioner had committed capital expenditure of £2.2m. £1.6m is committed for vehicle purchases and £0.6m is in relation to ongoing works for the Estates Change Programme. Intangible assets Prior to the introduction of IFRS, intangible assets were shown in the same disclosure as what are now property, plant and equipment assets. These are now shown separately.



However, the Commissioner has no material intangible assets and those which he does have are fully amortised.

16 Valuation Information The freehold and leasehold properties of the Commissioner's property portfolio have been valued under a rolling programme by Hampshire County Council's property services staff. Valuations were carried out in accordance with the methodologies and bases of estimation set out in the professional standards of the Royal Institute of Chartered Surveyors. For assets not included in the current year’s valuation programme, the change in value is estimated using Building Cost Information Services (BCIS) indices.

Valued: £'000 £'000 £'000 £'000 £'000 £'000At historical cost - 7,536 1,479 749 - 9,764 At fair value in:2015/16 - - - - - -2016/17 42,253 - - - - 42,253 2017/18 82,824 - - - - 82,824 2018/19 20,717 - - - 11,777 32,494 BCIS index estimate 40,351 - - - - 40,351 2019/20 30,256 - - - - 30,256 Total 216,401 7,536 1,479 749 11,777 237,942

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17 Financial Instruments A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Non-exchange transactions, such as those relating to taxes and government grants do not give rise to financial instruments. Financial instruments are recognised in the Balance Sheet when the authority becomes a party to the contractual provisions of the instrument.

Financial assets Financial assets are classified into one of three categories dependent on both:

the reason the authority is holding the asset (e.g. to collect the contractual cash flows until maturity and / or to sell before maturity); and

the nature of the asset’s contractual cash flows (e.g. just principal and interest or something more complicated).



Reason for holding the asset Nature of the

contractual cash flows

Classification category

Holding assets in order to collect contractual cashflows

Solely payments of principal and interest

Amortised Cost

Holding assets in order to collect contractual cashflows as well as selling the assets

Solely payments of principal and interest

Fair value through other comprehensive income

Holding assets that do not fall into either of the above categories

Not solely payments of principal and interest

Fair value through profit and loss

As an exception to the above, at initial recognition an authority may make an irrevocable election to present changes in the fair value of investments in equity instruments through other comprehensive income rather than through profit and loss. This is dependant on these investments being held for strategic rather than trading purposes. Such investments are then classified as Fair value through other comprehensive income. All financial assets are initially measured at fair value and recognised on the balance sheet. How the financial assets are subsequently measured, and how unrealised gains or losses are shown in the accounts is dependent on what category the asset has been classified as.

Classification category Subsequent

measurement basis

Presentation of unrealised gains & losses

Amortised Cost

Amortised Cost

A disclosure note

Fair Value through Other Comprehensive Income (FVOCI)

Fair Value

The ‘Other comprehensive income’ section of the Comprehensive Income & Expenditure Statement (CIES)

Fair Value through Profit & Loss (FVPL) Fair Value

The ‘Financing and investment income & expenditure’ section of the CIES.

A financial asset is derecognised from the Balance Sheet when the contractual rights to the cash flows expire, or the financial asset is transferred. Interest or dividends are credited to the Financing and Investment Income and Expenditure line in the CIES. Dividends are credited when they become receivable by the authority.



Interest income is credited based on the amortised cost of the asset multiplied by its effective interest rate. Financial liabilities

All financial liabilities are classified as subsequently measured at amortised cost. This means they are initially measured at fair value before subsequently being measured at amortised cost. The amount presented in the Balance Sheet is therefore the outstanding principal repayable (plus accrued interest);

Annual charges to the Financing and Investment Income and Expenditure line in the CIES for interest payable are based on the carrying amount of the liability, multiplied by the effective interest rate for the instrument. The amount payable each year therefore matches to the loan agreement.

Impairment of Financial Instruments – Expected Credit Loss (ECL) model

At each reporting date, using reasonable and supportable forward looking information that is available without undue cost or effort, an authority shall assess whether the risk of default occurring over the life of the financial instrument has increased significantly since it was initially recognised.

The basis of this assessment determines the ECL that is then charged to the ‘Financing and investment income & expenditure’ section of the CIES:

Risk of default has increased significantly ECL equal to the anticipated loss over the lifetime of the financial instrument

Risk of default has not increased significantly

ECL equal to the anticipated loss over the next 12 month period

A simplified approach for calculating the ECL can be used for trade receivables, contract assets and lease receivables that do not contain a significant financing component.



The following categories of financial instrument are carried in the Balance Sheet:

Financial Assets 31/03/2019 31/03/2020 31/03/2019 31/03/2020£’000 £’000 £’000 £’000

Investments:At amortised cost

- Principal 5,009 0 21,013 12,517 - Accrued interest 0 0 71 60 - Loss Allowance (2) 0 (2) (1)

At Fair Value through OtherComprehensive Income (FVOCI)

- Principal at amortised cost 0 0 0 0 - Accrued interest 0 0 0 0 - Loss allowance 0 0 0 0 - Fair value adjustment 0 0 0 0 - Equity investments 0 0 0 0

At Fair Value through Profit & Loss- Fair value 5,317 6,819 0 0

Total investments 10,324 6,819 21,082 12,576

Cash & cash equivalents:- Cash (including bank accounts) (2,604) (641)- At amortised cost 1,001 8,033 - At FVOCI 0 0 - At Fair Value through Profit & Loss 7,650 20,280

Total cash and cash equivalents 0 0 6,048 27,672

Loans and receivables:- trade debtors 0 294 9,247 14,478

Total financial assets 10,324 7,113 36,377 54,726

Short TermLong Term

Financial Liabilities 31/03/2019 31/03/2020 31/03/2019 31/03/2020£’000 £’000 £’000 £’000

Loans at amortised cost: -Principal sum borrowed (30,450) (29,950) (500) (500) -Accrued interest (179) (177)

Total borrowing (30,450) (29,950) (679) (677)

Liabilities at amortised cost: -Finance leases 0 0 0 0 -Trade creditors 0 0 (17,415) (23,938)

Total other liabilities 0 0 (17,415) (23,938)Total (30,450) (29,950) (18,094) (24,615)

Long Term Short Term



Surplus cash is invested in short term deposits to earn interest. Investments on deposit are valued at their nominal value. Investment income is recognised on receipt. The value of long-term (i.e. greater than one year) investments and loans is shown on the balance sheet with the 'current portion' of debt (i.e. that which is due in the following accounting period) being attributed to current liabilities (i.e. creditors) or current assets (i.e. debtors). The balance on these long-term liabilities or assets is shown in the appropriate category on the balance sheet. 17a Fair values of Assets and Liabilities Financial assets classified as fair value through other comprehensive income (FVOCI) or fair value through profit and loss (FVPL) are carried in the Balance Sheet at fair value. For most assets, including bonds, treasury bills and shares in money market funds and other pooled funds, the fair value is taken from the market price. The fair values of other instruments have been estimated calculating the net present value of the remaining contractual cash flows at 31st March 2020, using the following methods and assumptions:

Certificates of deposit have been discounted at market interest rates for instruments of similar credit quality and remaining term to maturity

All other financial assets and financial liabilities are carried in the Balance Sheet at amortised cost. Their fair values have been estimated by calculating the net present value of the remaining contractual cash flows at 31 March 2020, using the following methods and assumptions:

Loans borrowed by the PCC have been valued by discounting the contractual cash flows over the whole life of the instrument at the appropriate market rate for local authority loans;

No early repayment or impairment is recognised for any financial instrument; The fair value of short-term instruments, including trade payables and receivables is

assumed to approximate to the carrying amount; The fair values of investments have been discounted at the market rates for similar

instruments with similar remaining terms to maturity on 31 March; Liabilities The fair value of the long-term liabilities is higher than the carrying amount because the Commissioner's portfolio of loans includes a number of loans where the interest payable is higher than the rates available for similar loans at the Balance Sheet dates. This shows a notional loss (based on economic conditions at the balance sheet date) arising from a commitment to pay interest to lenders above current market rates at that time. Assets Short term debtors and creditors are carried at cost as this is a fair approximation of their value. Long term debtors shown on the balance sheet consist largely of housing assistance loans and the carrying value of long-term debtors is fair value. Housing assistance loans, totalling £0.92m, were offered to police officers and operational police staff between 2004/05 and 2007/08. Interest free loans of up to £20,000 were made.



A charge was placed on the property purchased and this becomes repayable at the end of 15 years or earlier in the case of a sale. Because the prevailing interest rate at the time the advance was made was greater than the actual rate of interest applied (i.e. 0%) transactions of this nature were termed 'soft loans'. The fair value of the remaining housing assistance loans is £0.3m (£0.30m at 31 March 2019). This is now the same as the carrying value.

Fair values are shown in the table below, split by their level in the fair value hierarchy:

Level 1 - fair value is only derived from quoted prices in active markets for identical assets or liabilities, e.g. bond prices;

Level 2 - fair value is calculated from inputs other than quoted prices that are observable for the asset or liability, e.g. interest rates or yields for similar instruments;

Level 3 - fair value is determined using unobservable inputs, e.g. non-market data such as cash flow forecasts or estimated creditworthiness.



Fair31/03/2019 31/03/2020 31/03/2019 31/03/2020

£’000 £’000 £’000 £’000Financial LiabilitiesLong term loans from PWLB 2 (31,129) (30,627) (39,650) (39,406)Accrued interestTotal loans borrowed (31,129) (30,627) (39,650) (39,406)Liabilities for which fair value is not disclosed * (17,415) (23,938)

Total financial liabilities (48,544) (54,565) (39,650) (39,406)Recorded on balance sheet as:Short term creditors (17,415) (23,938) 17dShort term borrowing (679) (677) 17aLong term creditorsLong term borrowing (30,450) (29,950) 17aTotal financial liabilities (48,544) (54,565)

Financial AssetsHeld at fair value:

Money market funds 1 7,650 20,280 7,650 20,280 Bond, equity & property funds 1 2,183 2,892 5,317 2,892 Certificates of deposit 2 3,134 3,927 3,927 Corporate & government bondsAssets held at amortised cost:Long term loans to other authorities

Held at amortised cost:Corporate & government bonds 1 4,007 0 4,009 0

Long-term loans to local authorities and housing associations

2 1,004 0 1,003 0

Total 17,978 27,099 17,979 27,099 Assets for which fair value is not disclosed * 29,018 34,446 Total financial assets 46,996 61,545

Recorded on balance sheet as:Long term investments 10,325 7,113 17eLong term debtors 295 294 17e

Short term investments 21,082 12,576 17eCash and cash equivalents 6,047 27,672 17jShort term debtors 9,247 14,478 17iShort term service loansTotal financial assets 46,996 62,133

Not

e

* the fair value of short term liabilities and assets including trade payables and receivables isassumed to be the approximate to the carrying amount.

Balance Sheet Fair ValueValuelevel



17b Trade Receivables (Debtors) Within debtors, accounts receivable, classified as receivable financial instruments, are due within one year with no interest being payable. As such, the fair value of these receivables is the same as the original invoice amount. Other debtor balances such as payments in advance and government debtors (relating, for example, to vat refunds due) are non contractual and outside the scope of the "financial instruments" regulations.

31 March 31 March 2019 2020£'000 £'000

9,247 Financial instrument debtors 14,47821,105 Non-financial instrument debtors 22,31230,352 Total debtors and prepayments 36,790

The Commissioner reviews the exposure to debtors failing to pay amounts which are due to the Commissioner on an annual basis and assesses whether there is a likelihood that a proportion of debts may be considered to be impaired on the basis of experience that some debts will be unrecoverable. The sum assessed as an expected loss allowance for receivables is £325,000 as at 31 March 2020 (£325,000 as at 31 March 2019). 17c Trade Payables (Creditors) Trade payables (creditors), classified as financial liabilities, are paid within 30 days of the date shown on the invoice. As such, the fair value of these liabilities is the same as the original invoice amount.

Short-term creditors – Group 31 March 31 March

2019 2020£'000 £'000(17,415) Financial instrument creditors (23,938)(12,644) Non-financial instrument creditors (13,729)(30,059) Total short term creditors (37,667)

The short-term creditors exclude other items such as accrued interest and the principal on long-term borrowing due to be paid in the 12 months after the balance sheet date: these are shown separately under Current Liabilities in the Balance Sheet.



Short-term creditors – PCC 31 March 31 March

2019 2020£'000 £'000(17,415) Financial instrument creditors (23,938)

(8,447) Non-financial instrument creditors (9,389)(25,862) Total short term creditors (33,327)

17d Financial liabilities at amortised cost (Long-term borrowing) The Commissioner's borrowing strategy for 2019/20 was set in April 2019 and updated in February 2020. The PCC’s chief objective when borrowing money was to strike an appropriately low risk balance between securing low interest costs and achieving cost certainty over the period for which funds are required. The flexibility to renegotiate loans should the OPCC’s long-term plans change was deemed a secondary objective. Given the significant cuts to public expenditure and in particular to local government funding, the OPCC’s borrowing strategy remained to address the key issue of affordability without compromising the longer-term stability of the debt portfolio. With short-term interest rates currently much lower than long-term rates, it was likely to be more cost effective in the short-term to use internal resources. By doing so, the OPCC was able to reduce net borrowing costs (despite foregone investment income) and reduce overall treasury risk. The benefits of internal borrowing will be monitored regularly against the potential for incurring additional costs by deferring borrowing into future years when long-term borrowing rates are forecast to rise. No new long-term borrowing was taken out in 2019/20 due to a combination of the cost of carry and the level of internal balances and reserves which are available for temporary financing and to fund the capital programme. Financial guarantee contracts When a financial guarantee is given, whereby the liabilities of a third party are guaranteed in the event of a default, the Code requires that this is recognised in the accounts at fair value. The fair value is assessed in relation to the level of the financial guarantee and the probability of this being called. By being the signatory to property leases and by being the employer of all of the staff, the Commissioner has effectively guaranteed the lease payments for premises occupied by the ACPO Criminal Records Office (ACRO) and the ACPO Vehicle Crime Intelligence Service (AVCIS). In 2015/16 this arrangement was extended to include the National Wildlife Crime Unit (NWCU) However, in respect of the premises and any prospective redundancy costs, sureties have been received and are held as deposits in the event that the services are discontinued. The sums held represent the liability to pay outstanding leasing payments under the lease and any redundancy costs which may arise. As such, these sums are not premia paid to the Commissioner for bearing a potential risk. Rather, these are deposits held to pay all sums due in the event of either of these services ceasing with insufficient notice to mitigate any residual liabilities. Consequently, there is no recognition of these arrangements as financial guarantees in the statement of accounts.



Risks The Commissioner has adopted CIPFA’s Code of Practice on Treasury Management (and subsequent amendments) and complies with The Prudential Code for Capital Finance in Local Authorities (both revised in 2017). As part of the adoption of the Treasury Management Code, the Commissioner approves a Treasury Management Strategy before the commencement of each financial year. The Strategy sets out the parameters for the management of risks associated with Financial Instruments. The Commissioner also produces Treasury Management Practices specifying the practical arrangements to be followed to manage these risks. The Treasury Management Strategy includes an Annual Investment Strategy in compliance with the guidance provided by the CLG for local authorities. This guidance emphasises that priority is to be given to security and liquidity, rather than yield. The Commissioner’s Treasury Strategy, together with his Treasury Management Practices seeks to achieve a suitable balance between risk and return or cost. The Commissioner is exposed to several risks arising from the use of financial instruments:

Credit risk – the possibility that other parties might fail to pay amounts due to the Commissioner;

Liquidity risk – the possibility that the Commissioner might not have funds available to meet its commitments to make payments;

Market risk – the possibility that financial loss might arise for the Commissioner as a result of changes in such measures as interest rates or stock market movements.

Credit Risk Credit risk is the possibility that banks and financial institutions will fail to meet their contractual obligations, causing a loss to the Commissioner. The OPCC manages credit risk by ensuring that treasury investments are only placed with organisations of high credit quality as set out in the Treasury Management Strategy. These include commercial entities with a minimum long-term credit rating of A-, the UK government, other local authorities, and organisations without credit ratings upon which the Commissioner has received independent investment advice. Recognising that credit ratings are imperfect predictors of default, the OPCC has regard to other measures including credit default swap and equity prices when selecting commercial entities for investment. A limit of £10m of the total portfolio is placed on the amount of money that can be invested with a single counterparty (other than the UK government). For unsecured investments in banks, building societies and companies, a smaller limit of £5m applies. The OPCC also sets limits on investments in certain sectors. No more than £15m in total can be invested for a period longer than one year. The credit quality of £4m of the Commissioner’s investments is enhanced by collateral held in the form of covered bonds collateralised by residential mortgages. The collateral significantly reduces the likelihood of the OPCC suffering a credit loss on these investments. The table below summarises the credit risk exposures of the Commissioner’s investment portfolio at 31 March 2020 by type of investment counterparty:



£'000 £'000 £'000 £'000AAA 4,007 - 12,161 4,005 AA+ - - - -AA - - - -AA- - - 3,004 4,997 A+ - - - 13 A - - - 3,036 A- - - - -AAA Money market funds - - - 20,280 Unrated local authorities 1,004 - 14,563 8,558 Unrated pooled funds 5,317 6,819 - -Total Investments 10,328 6,819 29,728 40,889

Credit Rating

Long-term Short-term

31 March 2019

31 March 2020

31 March 2019

31 March 2020

Liquidity Risk Liquidity risk is the possibility that the Commissioner will be unable to raise funds to meet its payment commitments as they fall due. As the Commissioner has ready access to borrowing through the Public Works Loan Board and commercial banks, there is no perceived risk that the Commissioner will be unable to raise finance to meet its commitments under financial instruments. Instead, the risk is that the Commissioner will be bound to replenish a significant proportion of its borrowings at a time of unfavourable interest rates. This risk is managed by maintaining a spread of fixed rate loans, limiting the amount of the Commissioner’s borrowing that matures in any one financial year. The maturity analysis of the principal sums borrowed as at 31 March 2020 is as follows:

31 March 2019

% of total debt

portfolio

31 March 2020

% of total debt

portfolio

£'000 % £'000 %Less than 1 year (500) 2 (500) 2Between 1 and 2 years (500) 2 (250) 1Between 2 and 5 years (600) 2 (700) 2Between 5 and 10 years (350) 1 - -Between 10 and 15 years (12,000) 39 (18,000) 59Between 15 and 20 years (17,000) 55 (11,000) 36Between 20 and 25 years - - - -Total (30,950) 100 (30,450) 100

Outstanding debt - maturity periods



Market Risks Interest Rate Risk. The Commissioner is exposed to risks arising from movements in interest rates. The Treasury Management Strategy aims to mitigate these risks through the interest rate risk indicator. At 31 March 2020, all of the £30.45m of principal borrowed was at fixed rates. £20.55m of the OPCC’s investment balance at 31 March 2020 was exposed to variable interest rates, including £4m of floating rate notes. The OPCC’s investments in diversified income pooled funds (£1.5m at 31 March 2020) also have some exposure to interest rate risk. Investments measured at amortised cost and loans borrowed are not carried at fair value, so changes in their fair value will have no impact on the Comprehensive Income and Expenditure Statement. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus or Deficit on the Provision of Services. Movements in the fair value of fixed rate investments measured at fair value will be reflected in Other Comprehensive Income or the Surplus or Deficit on the Provision of Services as appropriate. If all interest rates had been 1% higher (with all other variables held constant) the financial effect would be:

£'000-

(385)39

(346)

-(346)Impact on Comprehensive Income and Expenditure

Impact on (Surplus) or Deficit on the Provision of Services

Increase in interest receivable on variable rate investmentsIncrease in interest payable on variable rate borrowing

Decrease in fair value of investments held at FVOCI

Decrease in fair value of investments held at FVPL

The approximate impact of a 1% fall in interest rates would have been as above but with the movement being reversed. Price Risk. The market prices of the Commissioner’s fixed rate bond investments are governed by prevailing interest rates and the market risk associated with these instruments is managed alongside interest rate risk. The commissioner’s investment in a pooled property fund is subject to the risk of falling commercial property prices and his investment in pooled equity funds are subject to the risk of falling share prices. This risk is limited by the Commissioner’s investment strategy. A fall in commercial property or share prices would result in a charge to the surplus or deficit on the Provision of Services which is then transferred to the Financial Instrument Adjustment Account – this would have no impact on the General Fund until the investment was sold. Foreign Exchange Risk. The Commissioner has one significant financial asset denominated in a foreign currency (i.e. Euro), which it holds in a designated Euro currency bank account. Whilst the account balance is included in the Balance Sheet under cash and cash equivalents at the spot exchange rate pertaining on 31 March 2020, this is for accounting and reporting purposes only. The Euro account is held so that the Commissioner can account for the use of the EU grant it relates to and the donor bears the risk of any losses or benefits from any gains arising from movements in exchange rates.



The Commissioner therefore has no exposure to loss arising as a result of adverse movements in exchange rates.

18 Cash and cash equivalents Under the Code, Cash and Cash Equivalents are to be disclosed on the face of the Balance Sheet. Cash comprises cash in hand and repayable on demand deposits. The latter typically consisting of cash held in deposit accounts but subject to repayment on demand, and cash held in deposit accounts but subject to instant access. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. The Code also stipulates that they are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. The Commissioner excludes term deposits or investment accounts requiring notice for withdrawal from the classification of Cash Equivalents as in terms of liquidity they are not equivalent to cash. The Commissioner routinely uses short-term bank overdraft facilities which are repayable on demand, as an integral part of its cash management policy. Under these circumstances bank overdrafts are included as a component of cash and cash equivalents. Cash and cash equivalents – Group and PCC

2018/19 2019/20 £’000 £’000

339 Cash in hand 373 1,001 Cash equivalents measured at amortised cost 8,033

7,650 Cash equivalents measured at fair value through profit & loss 20,280

(2,943) Bank overdraft (1,014) 6,047 Total 27,672

19 IAS19 (Pensions Accounting) entries and disclosures

Participation in pensions schemes

The Chief Constable employs the majority of staff who previously were under the employment of the Commissioner. As such, these accounts include all of the related IAS19 pensions’ adjustments for those employees in the LGPS. However, a small number of staff work directly for the Commissioner on delivering his activities. Notwithstanding this, on the grounds that any proportionate share of the IAS19 entries would not be material to the accounts, all of the LGPS IAS19 adjustments are contained in the Chief Constable’s accounts.

As part of the terms and conditions of employment of its officers and other employees, the Commissioner and the Chief Constable offer retirement benefits. Although these benefits will not actually be payable until employees retire, the Chief Constable has a commitment to



make the payments that needs to be disclosed at the time that employees earn their future entitlement.

The Chief Constable participates in a number of post employment schemes:

The Local Government Pension Scheme (LGPS) for Police staff, administered by Hampshire County Council. This is a funded defined benefit scheme, meaning that the Chief Constable and employees pay contributions into a fund, calculated at a level intended to balance the pensions liabilities with investment assets;

Arrangements for the award of discretionary post retirement benefits upon early retirement in respect of members of the LGPS. Liabilities are recognised when an award is made and the Chief Constable recognises gains and losses in full, immediately through Other Comprehensive Income and Expenditure. Note that the employer's liabilities under these arrangements are not material and the relevant transactions and liabilities are included with the overall LGPS funded scheme;

Three schemes for police officers – the 1987, 2006 and 2015 schemes. These are unfunded defined benefit final salary schemes, meaning that there are no investment assets built up to meet the pensions liabilities, and cash has to be generated to meet actual pensions payments as they eventually fall due. Under the Police Pension Fund Regulations 2007, if the amount receivable by the pensions fund for the year is less than amount paid out, the Commissioner must annually transfer an amount required to meet the deficit to the pension fund. Subject to parliamentary approval, up to 100% of this cost is met by a central government pension top-up grant. If however the pension fund is in surplus for the year, the surplus is required to be transferred from the pension fund to the Commissioner to be then paid over to central government;

The Commissioner is also liable for payment of initial and ongoing costs in respect of officers who receive injury pension. Injury awards are funded by the employer in their entirety and are not part of the pension fund account.

Note that in the following analyses, the 1987, 2006 and 2015 police schemes are combined into one disclosure. These schemes are valued separately by the external actuary but the charges and credits to the CIES and the net Balance Sheet liability are accounted for as a single item.

Transactions relating to retirement benefits The cost of retirement benefits is recognised in the Net Cost of Services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charges made against the precept are based on the cash payable in the year, so the real cost of post employment/retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year:



2018/19 2019/20 2018/19 2019/20£'000 £'000 £'000 £'000

Comprehensive Income and Expenditure StatementCost of Services- Current service cost 48,840 58,037 19,790 23,703- Past service costs 88,820 2,181 7,870 220- (Gain)/loss from settlements - - - -Financing and Investment Income and ExpenditureNet interest expense 85,890 84,533 4,250 3,991

223,550 144,751 31,910 27,914

- - - (21,180) 28,163-

148,660 (186,911) 21,940 (19,025)(132,430) (41,031) (20,910) (11,822)

4,920 (145,908) 800 19,206

244,700 (229,099) 12,560 44,436

Movement in Reserves StatementReverse charge to Provision of Services (223,550) (144,751) (31,910) (27,914)

-

Employer's contributions to the scheme 26,010 32,607 15,750 17,114Benefits paid direct to beneficiaries - - - -

Charge on General Fund 26,010 32,607 15,750 17,114

- from changes in financial assumptions- from changes in demographic assumptions

Total post-employment benefit charged to the Comprehensive Income and Expenditure Statement

Total Charge to the Surplus or Deficit on the Provision of Services

Unfunded Police Pension Schemes

- from changes in actuarial experience

Other post-employment benefit charged to the Comprehensive Income and Expenditure Statement

Remeasurement of the net defined benefit liability comprising:

Actual Amount charged against the General Fund Balance for pensions in the year

Return on plan assets (excluding the amount included in the net interest expense)Actuarial (Gains)/Losses arising:-

LGPS (Police Staff)

[table continues on the next page]



2018/19 2019/20 2018/19 2019/20£'000 £'000 £'000 £'000

Comprehensive Income and Expenditure StatementCost of Services- Current service cost 1,400 2,087 70,030 83,827- Past service cost - - 96,690 2,401- (Gain)/loss from settlements - - - -Financing and Investment Income and Expenditure - -Net interest expense 1,540 1,466 91,680 89,990

2,940 3,553 258,400 176,218

Remeasurement of the net defined benefit liability comprising:- - - (21,180) 28,163-

3,740 (2,234) 174,340 (208,170)(2,240) 410 (155,580) (52,443)

100 35,646 5,820 (91,056)4,540 37,375 261,800 (147,288)

Movement in Reserves StatementReverse charge to Provision of Services (2,940) (3,553) (258,400) (176,218)

Employer's contributions payable to the scheme - - 41,760 49,721Benefits paid direct to beneficiaries 2,540 2,926 2,540 2,926

Charge on General Fund 2,540 2,926 44,300 52,647

All schemes - Summary

Actual Amount charged against the General Fund Balance for pensions in the year

Total Charge to the Surplus or Deficit on the Provision of Services

Total post-employment benefit charged to the Comprehensive Income and Expenditure Statement

- from changes in demographic assumptions- from changes in actuarial experience

Return on plan assetsActuarial (Gains)/Losses arising:-- from changes in financial assumptions

Injury Pensions (police officers)

Other post-employment benefit charged to the Comprehensive Income and Expenditure Statement



Pensions assets and liabilities recognised in the Balance Sheet The nature of the schemes is explained in note 19 to these accounts and further information is also given in the police pension fund account. Under the projected unit method the current service cost will increase as the members of the scheme approach retirement. There are no material prepaid or accrued pensions contributions at 31 March 2020. The nature of the three police pension schemes in operation is explained in note 19 to these accounts. In addition to the police pension schemes the costs of injury pensions falls upon the income and expenditure account. The amounts included in the Balance Sheet arising from the Chief Constable’s obligation in respect of his defined benefit plan are as follows:-

31 March 2019

31 March 2020

31 March 2019

31 March 2020

£m £m £m £m

3,563.13 3,301.42 62.55 97.00 - - - -

3,563.13 3,301.42 62.55 97.00

31 March 2019

31 March 2020

31 March 2019

31 March 2020

£m £m £m £m499.14 517.77 4,124.82 3,916.19

(330.99) (322.30) (330.99) (322.30)

168.15 195.47 3,793.83 3,593.89

Police Pension Schemes

Net liability arising from the defined benefit obligation


Present value of the defined benefit obligationFair value of plan assets

Value at year ending

Net liability arising from the defined benefit obligation

Total

Present value of the defined benefit obligationFair value of plan assets

Local Govt Pension Scheme

Value at year ending



Reconciliation of the Movements in the Fair Value of Scheme (Plan) Assets

2018/19 2019/20 2018/19 2019/20£m £m £m £m(3,344) (3,563) (462) (499)

(49) (58) (20) (24)(86) (85) (12) (12)(14) (13) (4) (4)

Remeasurement (gains) and losses:Actuarial gains and (losses) arising:-

(205) 136 (22) 19132 41 21 12(5) 146 (1) (19)

- - - -96 97 9 10

(89) (2) (8) -(3,564) (3,301) (499) (517)

2018/19 2019/20 2018/19 2019/20£m £m £m £m

(61) (63) (3,867) (4,125)(1) (2) (70) (84)(2) (1) (100) (98)

- - (18) (17)Remeasurement (gains) and losses:Actuarial gains and (losses) arising:-

(4) 2 (231) 1572 - 155 53- (36) (6) 91- - - -3 3 108 110- - (97) (2)

(63) (97) (4,126) (3,915)

Opening Balance - 1 AprilCurrent Service Cost

Closing balance - 31 March

Liabilities extinguished on settlementsBenefits Paid

Current Service CostInterest CostContributions from scheme participants



- from changes in actuarial experience- from changes in demographic assumptions- from changes in financial assumptions


Past service costsClosing balance - 31 March

- from changes in financial assumptionsLiabilities extinguished on settlementsBenefits Paid

Total

Opening Balance - 1 April


Interest CostContributions from scheme participants

- from changes in demographic assumptions

Past service costs



Reconciliation of the Present Value of the Scheme Liabilities (Defined Benefit Obligation)

2018/19 2019/20 2018/19 2019/20£m £m £m £m(3,344) (3,563) (462) (499)

(49) (58) (20) (24)(86) (85) (12) (12)(14) (13) (4) (4)

Remeasurement (gains) and losses:Actuarial gains and (losses) arising:-

(205) 136 (22) 19132 41 21 12(5) 146 (1) (19)

- - - -96 97 9 10

(89) (2) (8) -(3,564) (3,301) (499) (517)

2018/19 2019/20 2018/19 2019/20£m £m £m £m

(61) (63) (3,867) (4,125)(1) (2) (70) (84)(2) (1) (100) (98)

- - (18) (17)Remeasurement (gains) and losses:Actuarial gains and (losses) arising:-

(4) 2 (231) 1572 - 155 53- (36) (6) 91- - - -3 3 108 110- - (97) (2)

(63) (97) (4,126) (3,915)

Opening Balance - 1 AprilCurrent Service Cost

Closing balance - 31 March

Liabilities extinguished on settlementsBenefits Paid

Current Service CostInterest CostContributions from scheme participants



- from changes in actuarial experience- from changes in demographic assumptions- from changes in financial assumptions


Past service costsClosing balance - 31 March

- from changes in financial assumptionsLiabilities extinguished on settlementsBenefits Paid

Total

Opening Balance - 1 April


Interest CostContributions from scheme participants

- from changes in demographic assumptions

Past service costs

Note that, whilst not being part of the Police Pension Schemes, injury pensions are shown above for the purposes of completeness. Injury pensions are funded directly by the Chief Constable. There is a large deficit on the pension schemes overall, and the police pensions schemes in particular. However, statutory arrangements for funding the deficit mean that the financial position of the Chief Constable remains healthy:



the deficit on the Local Government Pension Scheme will be made good by increased

contributions over the remaining working life of employees (i.e. before payments fall due) as assessed by the scheme actuary;

finance is only required to be raised to cover discretionary benefits when the pensions are actually paid;

finance is only required to be raised to cover police pensions when the pensions are actually paid. At present, 100% of the difference between what is paid out to retired members and the sum of contributions from current members and the Chief Constable is met by additional grant from the Home Office.

The regular contributions expected to be made to the Local Government Pension Scheme by the Chief Constable in the year to 31 March 2021 are £11.2m. In addition, Strain on Fund Contributions may be required. Total expected contributions for the Police Pension Schemes are £81.06m. This figure includes both the Chief Constable’s contribution and the Top-Up Grant from the Home Office. In addition, the Chief Constable expects to pay £1.2m directly to beneficiaries of injury pensions. Basis for estimating assets and liabilities The liabilities are the estimated present value of the benefit payments due from the scheme in respect of the employer after the accounting reference date, valued using the projected unit method. Allowance is made for expected future increases in pay and pension and assumptions are made regarding mortality rates. The Chief Constable employs a building block approach in determining the rate of return on Fund assets. Historical markets are studied and assets with higher volatility are assumed to generate higher returns consistent with widely accepted capital market principles. The assumed rate of return on each asset class is set out below. The overall expected rate of return on assets is then derived by aggregating the expected return for each asset class over the actual asset allocation for the Fund at 31 March 2020. Both the Police Scheme and the Local Government Pension Scheme assets and liabilities have been assessed by Aon Hewitt Ltd. The principal assumptions used are as below:



The commutation assumptions used by the independent actuary are:

31 March 2019 31 March 2020

LGPS Each member was assumed to surrender pension on retirement, such that the total cash received (including any accrued lump sum from pre 2008 service) is 70% of the permitted maximum.

Each member was assumed to surrender pension on retirement, such that the total cash received (including any accrued lump sum from pre 2008 service) is 70% of the permitted maximum.

Police Pension schemes Assumed that 90% of members of the 1987 Scheme commute 25% of their pension.

Assumed that 90% of members of the 1987 Scheme commute 25% of their pension.

Assumed that no members of the 2006 Scheme elect to commute any of their pension.

Assumed that no members of the 2006 Scheme elect to commute any of their pension.



31 March

201931 March

2020

3.3% Rate of Inflation (RPI) (Police Officer Schemes) 2.6%2.1% Rate of Inflation (CPI) (LGPS) 1.8%2.2% Rate of Inflation (CPI) (Police Officer Schemes) 2.0%3.6% Rate of increase in salaries (LGPS) 2.8%3.7% Rate of increase in salaries (Police Officer Schemes) 3.0%2.1% Rate of increase in pensions (LGPS) 1.8%2.2% Rate of increase in pensions (Police Officer Schemes) 2.0%2.5% Rate for discounting scheme liabilities (LGPS) 2.3%2.4% Rate for discounting scheme liabilities (Police Officer Schemes) 2.3%

Longevity at 65 for current Pensioners (years):23.3 Men (LGPS) 23.026.1 Women (LGPS) 25.522.1 Men (Police Pension Schemes) 22.224.5 Women (Police Pension Schemes) 24.2

Longevity at 65 for future Pensioners (years):24.9 Men (LGPS) 24.727.8 Women (LGPS) 27.223.9 Men (Police Pension Schemes) 23.826.3 Women (Police Pension Schemes) 26.0

Sensitivity of assumptions The estimation of the defined benefit obligations is sensitive to the actuarial assumptions shown previously. The sensitivity analyses below have been determined based on reasonably possible changes to the assumptions occurring at the end of the reporting period and assumes for each change that the assumption analysed changes while all the other



assumptions remain constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be interrelated. The approximate impact of changing the key assumptions on the present value of the defined benefit obligation as at 31 March 2020 and the projected service cost for the year ending 31 March 2021 is set out below:- Baseline:-Police SchemesPresent Value of total obligation (excluding injury benefits) @ 31 March 2020 = £3,301.42MProjected Service cost 2020/21 = £57.07MLocal Government Superannuation SchemePresent Value of total obligation (funded scheme only) @ 31 March 2020 = £517.46MProjected Service cost 2020/21 = £22.90M

+ 0.1% p.a. - 0.1% p.a. + 0.1% p.a. - 0.1% p.a.

504.08 531.19 3,233.18 3,370.16

-2.6% 2.7% -2.1% 2.1%

21.98 23.86 54.84 59.34 -4.0% 4.2% -3.9% 4.0%

518.85 516.08 3,350.33 3,252.64

0.3% -0.3% 1.5% -1.5%

22.90 22.90 57.29 56.85 0.0% 0.0% 0.4% -0.4%

Rate of increase to pensions in payment and deferred pensions529.71 516.08 3,359.16 3,244.07

0.3% -0.3% 1.7% -1.7%

22.90 22.90 59.17 55.00 0.0% 0.0% 3.7% -3.6%

Adjustment to mortality age rating assumption-1 year +1 year -1 year +1 year

533.31 501.70 3,407.07 3,195.78

3.1% -3.0% 3.2% -3.2%

23.74 22.07 59.41 54.78 3.7% -3.6% 4.1% -4.0%

* Present value of total obligations (£M)* % change in present value of total obligations* Projected service cost (£M)* % change in projected service cost

* % change in present value of total obligations* Projected service cost (£M)* % change in projected service cost

LGPS Police Schemes

* Projected service cost (£M)* % change in projected service cost

* Present value of total obligations (£M)

Adjustment to discount rate

Rate of general increase in salaries* Present value of total obligations (£M)* % change in present value of total obligations

* % change in present value of total obligations

* Present value of total obligations (£M)

* % change in projected service cost* Projected service cost (£M)



The Police Pension Schemes have no assets to cover liabilities. The LGPS assets consist of the following categories, by proportion of the total assets held:

31 March 31 March 31 March 31 March2019 2020 2020 2020

% Quoted % Unquoted % Total %60.4 Equities 44.1 8.6 52.722.7 Government bonds 21.8 - 21.87.6 Property 0.8 6.5 7.35.2 Corporate bonds 0.0 - 0.02.3 Cash 2.0 - 2.01.8 14.1 2.1 16.2

100.0 82.8 17.2 100.0

Other (hedge funds, currency holdings, futures, private equities)

20 Provisions, Contingent Liabilities and Contingent Assets

Provisions

Provisions are made where an event has taken place that gives the Commissioner a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation. For instance, the Commissioner may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation. As at 31 March 2020, no provisions are required. The same was true as at 31 March 2019.

Contingent Liabilities

A contingent liability arises where an event has taken place that gives the Commissioner a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Commissioner. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts.

At the balance sheet date there were a number of potential liabilities in respect of events which are alleged to have happened in the past and where claims have been received from various third parties for damages and costs. Some of these relate to operational matters where liability has been alleged to have occurred in the past. These claims take some time to be settled but if they were to be settled all in the same year, insurance cover is in place to meet the costs of aggregate claims over a certain level; below this level (which is a combined £1.63m across the major categories of insurance) existing budgets or, exceptionally, the insurance reserve will cover the shortfall. However, it is considered extremely unlikely that all outstanding claims will be found against the Chief Constable and would, additionally, be settled in the same year.



The Chief Constable, along with other Chief Constables and the Home Office, currently has 95 claims lodged against her with the Central London Employment Tribunal. The claims are in respect of unlawful age discrimination arising from the transitional protection afforded to some people but not others when the Home Office made changes to the Police Pension Schemes in 2015 (known as McCloud Sargeant). This is a national issue. Potentially other claims may be lodged in the future following judgements made in other parts of the country, including the calculation of overtime payments that may be due to officers who historically managed intelligence sources

There are some claims which have been received for which the Chief Constable, through the Commissioner, is not insured and, again, the reserve or existing budgets would cover any awards of costs and damages. It is not certain that these or related events which might arise in the future would lead to rulings against the Commissioner or will lead to claims which are substantial. The insurance reserve to cover uninsured losses has remained at £1.47m (£1.47m at 31 March 2019).

Contingent Assets

A contingent asset arises where an event has taken place that gives the Commissioner a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Commissioner.

Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential.

Further to the implementation of the Estates Change Programme, a number of sites have been earmarked for disposal. Where such assets have been conditionally sold – i.e. subject to contract - deposits have been received. As these sales have yet to be completed, the income from deposits is not recognised as an asset as there is no contractual right to retain these sums until either the sale is completed or the prospective purchaser defaults on the contractual obligations. A contingent asset is recognised for these prospective sales and any deposits are recognised as receipts in advance

21 Events after the reporting period The Statement of Accounts was authorised for issue by the Chief Finance Officer on 15 June 2020. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2020, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information.



22 Notes to the cash flow statement 2019/20 - Group 22a Operating Activities – Interest The cash flows for operating activities include the following items:

2018/19 2019/20£'000 £'000

(357) Interest received (742)1,340 Interest paid 1,308 (333) Dividends received -650 566

22b Adjustments to the net surplus or deficit on the provision of services for non-cash movements

2018/19 Restated * 2019/20

£'000 £'000

(236,667) Adjustments to net surplus or deficit on the provision of services for non-cash movements

(166,549) Analysis:-

(214,100) Pensions (123,571) (15,895) Depreciation and impairment charged to CIES (7,594)

(53) Revaluation adjustments (211) (8,294) Increase/(Decrease) in Debtors 6,438

7,139 (Increase)/Decrease in Creditors (7,396) (120) Increase/(Decrease) in Inventories -

(7,309) Carrying amount of non-current assets and non-current assets held for sale, sold or de-recognised (1,736)

92 Movement in the value of

financial instruments (997)

-

Property, plant & equipment written off as REFCUS

(31,582)

- * Other non-cash items charged to the net surplus or deficit on the provision of services 101

(238,539) (166,549)

*The 2018/19 figure for other non-cash items charged to the net surplus or deficit on the provision of services has been corrected for an error identified, decreasing the adjustment from (£1.872m) as previously stated to £0.



22c Adjustments to the net surplus or deficit on the provision of services for investing and financing activities 2018/19 2019/20

£'000 £'000 18,440 Adjustment for items included in the net surplus or deficit on the

provision of services that are investing and financing activities 5,014

Analysis:-

7,068 Proceeds from the sale of PP&E, investment property and intangible assets

3,800

11,372 Capital grant (included within investing activities) 1,214

- Any other items for which the cash effects are investing or financing cash flows

-

18,440 5,014 22d Investing activities

2018/19 Restated * 2019/20

£'000 £'000Cash outflows

31,297 7,380

57,687 Purchase of short-term and long-term investments 80,484 - Other payments for investing activities -

Cash inflows

(7,068) (3,801)

(80,393) Proceeds from short-term and long-term investments (91,488)(11,441) * Other receipts from investing activities (1,214)

(9,918) (8,639)

Purchase of property, plant and equipment, investment property and intangible assets

Proceeds from the sale of property, plant and equipment, investment property and intangible assets

Net cash outflow/(inflow) from investing activities: *The 2018/19 figure for other receipts from investing activities has been corrected for an error identified, increasing the net cash inflow from investing activities from (£1.219m) to (£11.441m). Note that the purchase of investments and proceeds from the same are those relating to financial instruments only. These net off to agree with the movement of these two items on the balance sheet.



22e Financing activities

2018/19 2019/20£'000 £'000

Cash outflows

- -

1,066 Repayment of short- and long-term borrowing 502 - Other payments for financing activities - interest paid -

Cash inflows- Cash receipts of short- and long-term borrowing -- Other receipts from financing activities - interest received -

1,066 502

Cash payments for the reduction of the outstanding liabilities relating to finance leases

Net cash outflow/(inflow) from financing activities:



23 Notes to the cash flow statement 2019/20 - PCC 23a Operating Activities – Interest The cash flows for operating activities include the following items:

2018/19 2019/20£'000 £'000

(357) Interest received (742)1,340 Interest paid 1,308 (333) Dividends received -650 566

23b Adjustments to the net surplus or deficit on the provision of services for non-cash movements

2018/19 Restated * 2019/20

£'000 £'000

(22,479) Adjustments to net surplus or deficit on the provision of services for non-cash movements

(42,836) Analysis:-

- Pensions - (15,895) Depreciation and impairment charged to CIES (7,594)

(53) Revaluation adjustments (211) (8,294) Increase/(Decrease) in Debtors 6,438

7,227 (Increase)/Decrease in Creditors (7,254) (120) Increase/(Decrease) in Inventories -

- (Increase)/Decrease in Provisions -

(7,309) Carrying amount of non-current assets and non-current assets held for sale, sold or de-recognised (1,736)

92 Movement in the value of financial instruments

(997)

- Property, plant & equipment written off as REFCUS

(31,582)

- * Other non-cash items charged to the net surplus or deficit on the provision of services 101

(24,351) (42,836)

*The 2018/19 figure for other non-cash items charged to the net surplus or deficit on the provision of services has been corrected for an error identified, decreasing the adjustment from (£1.872m) as previously stated to £0.



23c Adjustments to the net surplus or deficit on the provision of services for investing and financing activities – PCC

2018/19 2019/20

£'000 £'000 18,440 Adjustment for items included in the net surplus or deficit on the

provision of services that are investing and financing activities 5,014

Analysis:-

7,068 Proceeds from the sale of PP&E, investment property and intangible assets

3,800

11,372 Capital grant (included within investing activities) 1,214

- Any other items for which the cash effects are investing or financing cash flows -

18,440 5,014 23d Investing activities - PCC

2018/19 Restated * 2019/20

£'000 £'000Cash outflows

31,297 7,380

57,687 Purchase of short-term and long-term investments 80,484- Other payments for investing activities -

Cash inflows

(7,068) (3,801)

(80,393) Proceeds from short-term and long-term investments (91,488)(11,441) * Other receipts from investing activities (1,214)

(9,918) (8,639)

Purchase of property, plant and equipment, investment property and intangible assets

Proceeds from the sale of property, plant and equipment, investment property and intangible assets

Net cash outflow/(inflow) from investing activities: *The 2018/19 figure for other receipts from investing activities has been corrected for an error identified, increasing the net cash inflow from investing activities from (£1.219m) to (£11.441m).



23e Financing activities – PCC

2018/19 2019/20£'000 £'000

Cash outflows1,066 Repayment of short- and long-term borrowing 502

- Other payments for financing activities - interest paid -

- -

Cash inflows- Cash receipts of short- and long-term borrowing -- Other receipts from financing activities - interest received -

1,066 502

Cash payments for the reduction of the outstanding liabilities relating to finance leases

Net cash outflow/(inflow) from financing activities: 24 Statement of Accounting Policies and Estimation Techniques 24.1 General Principles The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom (2019). This code is recognised by statute as representing proper accounting practices. Any significant non-compliance is explained in the following notes. The accounts have been compiled by applying the most appropriate policies and estimation techniques, taking into account the accounting concepts of qualitative characteristics of financial information (i.e. relevance, reliability, comparability and understandability), materiality and the pervasive accounting concepts (i.e. accruals, going concern and primacy of legislative requirements). All material income and expenditure including receipts, grants and employee costs have been accrued to the financial year to which they relate. The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments. 24.2 Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular:

Revenue from the sale of goods is recognised when the Commissioner transfers the significant risks and rewards of ownership to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the Commissioner.

Revenue from the provision of services is recognised when the Commissioner can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the Commissioner.



Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet.

Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made.

Interest receivable on investments and payable on borrowings is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract.

Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where debts may not be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected.

Amounts below £10,000 are not routinely accrued at year end even if they meet the other conditions. This is due to the fact that they are not material in the scale of the Commissioner’s overall income and expenditure. Where items of income or expenditure fall below this amount they may still be accrued in certain circumstances such as where they are subject to specific terms and conditions relating to a grant or where there is an element of cost recovery. Items of a similar nature which are individually below this £10,000 threshold may be aggregated if they could be said to have a similar material effect upon the reporting of a particular income, or expenditure head or cost centre. Where items for which an accrual might be justified in ordinary circumstances, but where these are ongoing and are regular, such as quarterly or monthly payments for utilities, the Commissioner takes a pragmatic approach and ensures that four quarters or twelve months are recorded in any one year where such payments or receipts are of relatively consistent amounts. Debtors and creditors are recorded in the Balance Sheet at their fair value, which in both categories of financial instrument is the actual invoiced amount. No estimation techniques are used. 24.3 Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment. Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Commissioner’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period.



24.5 VAT VAT payable is included as an expense only to the extent that it is not recoverable from Her Majesty’s Revenue and Customs (HMRC). VAT receivable is excluded from income. 24.6 Trading Account The Commissioner has one trading account in respect of venue hire for functions at the Training and Support Headquarters. The income and expenditure is now included within the net cost of services to give clearer reconciliations between the financial ledger and the statement of accounts. Any net surplus or deficit is credited or debited to an earmarked reserve at the year end. The modest level of turnover of this account (c £156,000) means that no separate disclosure is made. 24.7 Inventories Stock accounts are maintained for uniforms, vehicle spares, fuel, computer consumables and computer equipment and these are valued at latest buying price. This is a departure from IAS 2, but these inventory items are, on the whole, fast moving and interchangeable; any differences between cost, net realisable value or latest buying price are not material to the accounts. 24.8 Rounding convention Amounts reported in the financial statements may be rounded as appropriate. As most figures are reported in £’000’s, figures will be rounded to the nearest £1,000. Where figures are shown in £’s, they will be rounded to the nearest £1. In some instances, the 'totals' in the tables which are presented are the rounded additions of unrounded figures and, therefore, may not be the strict sums of the figures presented in the text or tables. This will only give minor differences and the overall total is more accurate in such instances. 25 Critical Judgements in Applying Accounting Policies

In applying the accounting policies, the Commissioner has to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgements made in the Statement of Accounts are:

All surplus properties have been reviewed and revalued in accordance with the IFRS 13 accounting standard, which came into use on 1 April 2015. None of these properties have been determined as being held for investment purposes;

An assessment of the Commissioner’s interests in companies and other entities has been carried out in accordance with the Code of Practice to determine whether any group accounting relationships exist. This review sought to determine whether there was any control over another entity as possibly demonstrated through ownership, such as shareholding in an entity or representation on an entity’s board of directors. The PCC is involved in joint working relationships with a number of other police forces, Hampshire County Council and the Hampshire Fire and Rescue Service in the provision of operational police activity or, with the latter two bodies, support services. None of these working arrangements and collaborations was deemed to require the inclusion of such in the group accounts. Rather, the relevant transactions equating to the Commissioner’s



own expenditure in the partnership were included as appropriate. This position remained unchanged in 2019/20. Further information is disclosed in note 12.

In these accounts, we continue to take notice of the following factors:-

The Chief Constable is classed as a local authority, allowing her to benefit from the statutory overrides contained in the Accounts and Audit Regulations 2015;

Clearer guidance on the accounting arrangements from CIPFA in the form of Local Authority Accounting Panel (LAAP) Bulletins and other communiqués now in place. This guidance aims to draw a distinction between both the form and substance of the arrangements between the two parties, the nature of control being a balance between strategic and operational control and the fact that, whilst the Commissioner can remove the Chief Constable post holder, he cannot remove the role itself;

A Stage 2 transfer scheme was approved by the Home Office Police Minister in 2014, with an agreed commencement date of 1 May 2014. Rather than make any fundamental change to the nature of the interrelationship between the Police and Crime Commissioner and the Chief Constable, as separate ‘corporations sole’ under a ‘group’ accounting arrangement (with the PCC having primacy), the Stage 2 transfer merely formalised certain aspects such as the having the majority of officers and staff under the command and control of the Chief Constable and the assets being owned exclusively by the Commissioner.

As a result of the above, we have reviewed the various aspects of the relationship between the Commissioner and the Chief Constable in order to determine how to account for these in the 2019/20 Statement of Accounts:-



Accounting determination

Consideration PCC CC Reasoning Expenditure CC to record all expenditure on staff, buildings,

supplies and services, vehicles etc. which is employed in the delivery of operational policing except those directly attributable to the activity and functions of the PCC

Employees – IAS19 As most members of staff are under the day to day operational command of the CC, the IAS 19 (employment benefits, including pensions and the adjustments in respect of accrued employee benefits) charges/credits are attributed to the CC. The net IAS19 adjustments are subject to statutory overrides in the Movement in Reserves Statement.

Charges for assets – i.e. depreciation and impairment

Whilst the CC has day to day operational control of most assets such as buildings and vehicles, the PCC manages the estate and the strategic direction of the use of that estate. Additionally, he provides resources for the purchase of new assets, uses the proceeds from the sale of assets to fund future development or to pay down long-term debt and is responsible for the long- term decisions relating to the financing of his capital expenditure.

Income – General Grants and Taxation

The PCC sets the precept and is the only recipient of general grants. The PCC receives the income which is put into the Police Fund.

Income – specific grants, service income (events, statutory charges etc.) and other contributions and donations

This is recorded in the accounts of whichever party the income is directly attributable or whose activities it relates to.

Working capital – debtors, creditors, provisions

The PCC settles all of the outstanding cash payments through his overall control of the resources available for policing in the county. Debtors and creditors are recorded in the CIES of the Commissioner and the Chief Constable to show the cost of their activities, but the balance sheet entries in respect of these belong to the PCC.

Reserves- General fund reserve, earmarked general fund reserves, other usable reserves

As the PCC controls and owns the Police Fund, he owns the associated reserves.

Reserves - unusable These are accounting reserves, required for different reasons most of which relate to the statutory overrides and accounting for assets. Most of these are attributable to the PCC, with the



Accounting determination

Consideration PCC CC Reasoning exceptions being those relating to the IAS19 entries in the accounts – i.e. the pensions reserve and the accumulated absences account – as these follow the staff to which they relate (i.e. and which are recorded in the CC’s Comprehensive Income and Expenditure Statement).

Going concern As neither a Police and Crime Commissioner nor a Constabulary can be created or dissolved without statutory prescription, the going concern assumption in the Accounting Code of Practice therefore assumes that both the Hampshire Police and Crime Commissioner and Hampshire Constabulary continue to operate for the foreseeable future. Whilst there is no statutory change to this position, the CFOs of both the PCC and the Constabulary have reviewed the impact of Covid-19 to date, and also the potential impact in the medium term. They have drawn the conclusion that whilst additional costs have been incurred, the overall financial risks presented by Covid-19 are not proving to be significant, and can be managed within the overall resources available including if necessary from reserves. The CFOs are content that the PCC and Constabulary will continue to operate on a going concern basis for the foreseeable future.



26 Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty

The Statement of Accounts contains estimated figures that are based on assumptions made by the Commissioner about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be different from the assumptions and estimates.

The items in the Commissioner’s Balance Sheet at 31 March 2020 for which there is a risk of material adjustment in the forthcoming financial year are as follows:

Item Uncertainties Effect if Actual Results Differ from Assumptions

Pensions Liability Estimation of net liability to pay pensions depends upon a number of complex judgements in relation to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. The Chief Constable receives annual forecasts and regular reviews of all of its assets and liabilities from an independent actuary to ensure that the accounts contain realistic estimates of the overall impact of these pensions’ liabilities.

The effects of the net pensions’ liability of changes in individual assumptions can be measured. For instance, a 0.1% increase in the discount rate assumptions would result in a decrease in the Police Pension Schemes liabilities of 2.1% and a decrease in the Local Government Superannuation Scheme liabilities of 2.6%. However, the assumptions interact in complex ways. More details are provided in the IAS19 disclosures at note 19.

Property, Plant and Equipment Valuations

The Commissioner requests valuations of PPE on a 5 year rolling programme, unless events indicate that a valuation is required ahead of the next planned valuations. Valuations are undertaken by qualified valuers within Hampshire County Council’s Property department in accordance with the Royal Institute of Chartered Surveyors (RICS) professional standards using recognised measurement techniques.

A change in value of 1% in the value of property not valued in year would result in an increase/decrease of £2m. This does not impact the usable reserves available to the authority.



27 Accounting Standards that have been issued but have not yet been adopted

The Code of Practice on Local Authority Accounting in the United Kingdom (the Code) requires the disclosure of information relating to the expected impact of an accounting change that will be required by a new standard that has been issued but not yet adopted. The additional disclosures that will be required in the 2020/21 financial statements in respect of accounting changes introduced in the 2020/21 Code are:

Amendments to IAS 28 Investments in Associates and Joint Ventures: Long-term Interests in Associates and Joint Ventures

o The amendments clarify that an organisation applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture. The impact is not expected to be material, as our main role is to provide public services rather than involvement in joint ventures.

The Annual Improvements to IFRS Standards 2015–2017 Cycle introduces four

changes. None of them are expected to be material, as our main role is to provide public services rather than involvement in joint operations, we do not pay dividends, and we already fully report borrowing costs.

o IFRS 3 Business Combinations - An organisation should remeasure its previously held interest in a joint operation when it obtains control of it.

o IFRS 11 Joint Arrangements – An organisation should not remeasure its previously held interest in a joint operation when it obtains joint control of it.

o IAS 12 Income Taxes – An organisation should account for all income tax consequences of dividend payments in the same way.

o IAS 23 Borrowing Costs – An organisation should treat as part of general borrowings any borrowing originally made to develop an asset when the asset is ready for its intended use or sale.

Amendments to IAS 19 Employee Benefits: Plan Amendment, Curtailment or

Settlement o This specifies how organisations determine pension expenses when changes

to a defined benefit pension scheme occur. If any relevant changes occur to the pension schemes we are involved with, we will ensure that the appropriate accounting standards are used.

Police Pension Fund Account


Police Pension Fund Account 2018/19 Police Pension Fund Account 2019/20

£'000 Contributions receivable £'000- from employer

(24,123) - normal (30,434)- early retirements

(1,677) - ill-health capital equivalent charges (1,999)(13,535) - from members (13,279)

Transfers in(234) - individual transfers in from other schemes (436)

Benefits payable79,147 - pensions 82,618 16,897 - commutations and lump sum retirement benefits 14,335

99 - lump sum death benefits 117 Payments to and on account of leavers

37 - refunds of contributions 16 10 - individual transfers out to other schemes 340

56,621 Net amount payable for the year 51,278 (56,621) Additional contribution from the Commissioner (51,278)

- -

2018/19 Net Assets Statement 2019/20£'000 £'000

Current Assets- - contributions due from employer -- - pensions paid to pensioners in advance -

Current Liabilities- - unpaid pension benefits -- - amount due to sponsoring department -

- other current liabilities

- -

Notes to the Police Pension Fund Account


The Pension Fund financial statements do not take account of any liabilities to pay pensions and other benefits after the period end. Most payments and employer contributions in respect of the police pension schemes are reported in the Police Pension Fund Account. Other pension costs are charged to the Comprehensive Income and Expenditure Statement. This includes the on-going costs and commuted lump sums in respect of officers who are awarded injury pensions, which totalled £2.54m in 2018/19. For officers who retire on the grounds of ill-health, the employer makes a contribution from the Comprehensive Income and Expenditure Account to the Police Pension Fund Account. This charge is the equivalent to two years' pensionable pay and is a one off credit to the account. All on-going payments are met by the Police Pension Fund. Debtors and creditors of the Police Pension Fund Account are included within the main financial statements of the Commissioner as a result of the reimbursement of the top up grant and the cash being transferred between the Commissioner and Pension Fund bank accounts on a regular basis. The Scheme Manager of the Police Pension Fund is the Chief Constable. The administration of the fund is carried out by the County Council as part of the joint working arrangements. The administrator makes all payments to existing and new pensioners and maintains the necessary records of entitlement. The Commissioner provides the funds to make payments to pensioners and for transfers out of the scheme. The Commissioner’s budget and current serving officers make contributions into the fund and at present 100% of any shortfall between this income and the payments made is met by a grant from the Home Office. A Police Pensions Board was introduced in April 2015 in accordance with the Public Services Pensions Act 2013. The Board is chaired by the Chief Constable’s Chief Finance Officer and has equal membership from the employer and employee side. The Police Pension Fund makes payments to officers who retire from the scheme whilst in the employment of the Chief Constable or who have previously worked for the Chief Constable and who have a deferred pension. This is based on the length of service and pensionable pay at the point of retirement. Officers may choose to commute part of their benefit into a lump sum and to receive a reduced on-going pension. Benefits are also paid to dependents when an officer dies in service or after retirement. Employees make the following contributions:-

1987 Scheme 14.25%-15.05% 2006 Scheme 11.00%-12.75% 2015 Scheme 12.44%-13.78%

The employer made a contribution of 31% of pensionable salary and benefits in 2019/20, and increase of 6.8% from 2018/19. The Chief Constable received a £2.99m grant to be used towards the increase in the contribution rate. The employee’s contribution is set nationally by the Home Office and is subject to a triennial revaluation by the Government Actuary's Department (GAD).

Notes to the Police Pension Fund Account


The Police Pension Fund Account has been prepared in accordance with the extant Police Pensions Regulations and the accounting policies detailed in Note 24. Note 19 shows further detail of the IAS19 entries and the pension schemes.

Annual Governance Statement


Annual Governance Statement for Police and Crime Commissioner (Draft) 1. Scope of Responsibility 1.1 The Police and Crime Commissioner is responsible for ensuring that:

business is conducted in accordance with the law and to proper standards. public money is safeguarded and properly accounted for, and used economically,

efficiently and effectively. he secures continuous improvements in the way in which functions are exercised,

having regard to a combination of efficiency, effectiveness and economy. there is a sound system of internal control which facilitates the effective exercise

of the Police and Crime Commissioner's functions and which include arrangements for the management of risk.

1.2 This Statement explains how the Police and Crime Commissioner has complied with

the Code of Practice on Local Authority Accounting in the United Kingdom 2019/20) and meets with the requirements of the Accounts and Audit (England) Regulations in relation to the publication of an Annual Governance Statement.

2. The purpose of Corporate Governance 2.1 The governance framework comprises the systems, processes, cultures and values

by which the Office of the Police and Crime Commissioner is directed and controlled and its activities through which it accounts to, engages with and leads the community. It enables the Police and Crime Commissioner to monitor the achievements of the Police and Crime Plan and to consider whether they have led to the delivery of appropriate, cost effective services.

2.2 The system of internal control is a significant part of the framework and is designed to manage risk to a reasonable level. It cannot eliminate all risk of failure to achieve policies, aims and objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risk to the achievement of the Police and Crime Commissioner’s policies aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically.

2.3 The governance framework has been in place for the year ending 31 March 2020 and up to the date of approval of the statement of accounts.

2.4 The Police and Crime Commissioner has approved and adopted a Scheme of Corporate Governance, which is consistent with the principles of the CIPFA/SOLACE Framework ‘Delivering Good Governance in Local Government’. The Scheme of Corporate Governance is reviewed at the Joint Audit Committee. Agendas and minutes of the Joint Audit Committee are published on the website.

2.5 The CIPFA/SOLACE framework identifies seven principles of good governance:

Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law

Ensuring openness and comprehensive stakeholder engagement Defining outcomes in terms of sustainable economic, social and

environmental benefits



Determining the interventions necessary to optimise the achievement of the intended outcomes

Developing the entity’s capacity, including the capability of its leadership and the individuals within it

Managing risks and performance through robust internal control and strong public financial management

Implementing good practices in transparency, reporting and audit to deliver effective accountability.

2.6 The first two principles underpin the whole 2016 framework and are implicit in the remaining five principles.

3. Core Principles of good governance 3.1 Behaving with Integrity, demonstrating strong commitment to ethical values,

and respecting the rule of law 3.1.1 The Office of the Police and Crime Commissioner operates in an open and

transparent way and the Police and Crime Commissioner sets the tone for the organisation by creating a climate and culture of openness, support, and respect.

3.1.2 The Police and Crime Commissioner is committed to the highest ethical standards and has adopted a governance framework to re-enforce this philosophy as well as procedures to investigate any issues should the need arise. The framework, policies and procedures are set out in the Police and Crime Commissioner’s Scheme of Corporate Governance. The Scheme of Corporate Governance demonstrates a comprehensive commitment on the part of the Police and Crime Commissioner to integrity, ethical values and the rule of law.

3.1.3 The key governance legal powers and responsibilities within the Office of the Police and Crime Commissioner are set out in legislation and statutory guidance (especially the Police Reform and Social Responsibility Act 2011, Policing Protocol Order 2011, Revised Financial Management Code of Practice 2018 and Strategic Policing Requirement), the Scheme of Delegation and Consent, Financial Regulations and Contract Standing Orders. These are referenced in the Scheme of Corporate Governance.

3.1.4 To support him in his role as the Monitoring Officer (MO), the Chief Executive has appointed a legally qualified Deputy MO. The deputy MO is an external appointment, whose host employer is Hampshire County Council. The deputy MO provides valuable additional oversight for the Chief Executive and the Police and Crime Commissioner on the Governance Framework.

3.2 Ensuring openness and comprehensive stakeholder engagement. 3.2.1 The Police and Crime Commissioner has produced the Police and Crime Plan. The

Plan sets out the Police and Crime Commissioner’s Vision, Priorities and Mission. The clear strategic aims of which are communicated on the Police and Crime Commissioner’s website and through various communications. This provides an operating model for business planning. The mission for the Police and Crime Commissioner is:



3.2.2 The Police and Crime Commissioner has a clear governance framework for

corporate decision making. The Police and Crime Commissioner’s decisions have clear guidance and protocols on decision making and templates for decision reports. All decisions are published, albeit that consideration is given to redacting some elements where this is necessary and proportionate.

3.2.3 Public consultation is undertaken on an ongoing basis to inform decision making. Targeted consultation takes place for specific decisions such as the public consultation on the council tax precept. The Police and Crime Commissioner hosts public events and attends community events to inform and consult the public. The Police and Crime Commissioner is scrutinised by the Police and Crime Panel which consists of members from local authorities and independent members who also consult their local communities and offer feedback to the Police and Crime Commissioner. Other consultation is undertaken such as via the Joint Audit Committee and specific focus groups facilitated by the Police and Crime Commissioner’s staff.

3.3 Defining outcomes in terms of sustainable economic, social and environmental benefits.

3.3.1 The strategic aims set out in the Police and Crime Plan underpin the Police and Crime Commissioner’s overarching ambitions for delivering positive economic, social and environmental outcomes for Hampshire, the Isle of Wight, Portsmouth and Southampton. Delivery of the Plan is monitored internally within the Office of the Police and Crime Commissioner and also through the scrutinising function of the Police and Crime Panel. Ultimately the Police and Crime Commissioner is held to account by the electorate.

3.4 Determining the interventions necessary to optimise the achievement of the intended outcomes.

3.4.1 Clear guidance and protocols exist for decision making and the involvement of the Deputy Monitoring Officer and the CFO in all significant decisions of the Police and Crime Commissioner ensures that decisions are only made after relevant options have been weighed and associated risks assessed from a legal and financial



perspective. Details of the guidance and protocols are set out in the Scheme of Corporate Governance.

3.4.2 The budget setting process is well established. The budget is set by the Police and Crime Commissioner after proposals on the council tax precept are consulted upon with the public and scrutinised in public by the Police and Crime Panel. The budget is set in the context of achieving the Police and Crime Plan.

3.4.3 A medium term financial strategy, capital programme and reserves strategy is updated each year together with relevant resource forecasts and takes full account of the changing regulatory, environmental, demographic, economic and demand factors and funding that impact on the financial environment in which the Police and Crime Commissioner operates.

3.4.4 Risks associated with the achievement of intended outcomes are detailed in Risk Registers held at strategic and project level. These evaluate the effectiveness of existing control measures as well as identifying proposed mitigation.

3.5 Developing the entity’s capacity including the capability of its leadership and the individuals within it

3.5.1 The Police and Crime Commissioner places a significant value of the capability of leadership. Each individual has a Personal Development Review on a regular basis with their line manager to ensure that any skill gaps are addressed and to discuss opportunities for development.

3.5.2 The Police and Crime Commissioner regularly reviews the structure of the workforce against the needs of the service in the context of its capacity and capability requirements. This then informs a range of strategies, for example; recruitment, retention and people development in order to provide effective leadership and deploy appropriate resources to meet the needs of services.

3.5.3 There is an emphasis on the need for high performance, of which resilience and continuous development play key parts, both of which factor in the regular discussions between managers and staff.

3.6 Managing risks and performance through robust internal control and strong public financial management.

3.6.1 The Police and Crime Commissioner operates a robust Risk Management Strategy, with reports to the Joint Audit Committee. The Joint Audit Committee has provided significant guidance and advice for the enhancement of the risk management arrangements.

3.6.2 The Internal Audit Plan provides the mechanism through which the Chief Executive and CFO agree in consultation with the Chief Internal Auditor the most appropriate use of internal audit resources.

3.6.3 The Internal Audit Plan was developed to operate at a strategic level providing a value adding, and proportionate, level of assurance aligned to the Police and Crime Commissioner’s key risks and objectives. This includes a periodic review of the Police and Crime Commissioner’s risk management processes.

3.6.4 The Audit Plan remains fluid to ensure Internal Audit’s ability to react to the changing needs of the Police and Crime Commissioner.



3.6.5 The Internal Audit plan incorporates provision for both proactive and reactive counter fraud and corruption work, which is underpinned by an embedded Counter Fraud & Corruption Strategy and Policy and Anti Bribery Act Policy.

3.6.6 The delivery of the Internal Audit plan enables the Chief Internal Auditor to provide an annual report providing an opinion on the overall adequacy and effectiveness of the framework of governance, risk management and control which is reported to the Joint Audit Committee and Police and Crime Commissioner.

3.6.7 Specifically for IT and Information Management, which is provided in collaboration with and by Thames Valley Constabulary (TVP), the Joint Audit Committee have access to and receive regular audit reports from the TVP Internal Audit team, as well as an annual internal audit opinion on the overall adequacy and effectiveness of the framework of governance, risk management and control. The JAC are also sighted on the proposed annual IT audit plan.

3.6.8 The outcomes and assurance levels provided by TVP on individual audits, together with the annual opinion, are taken into account by the Chief Internal Auditor in providing the opinion on the overall adequacy and effectiveness of the framework of governance, risk management and control.

3.6.9 The Joint Audit Committee is well established and provides independent advice to the Police and Crime Commissioner and Chief Constable. Members of the Joint Audit Committee have no executive responsibility for the management of the organisation, thus ensuring that they are sufficiently independent to scrutinise and challenge matters brought to their attention. This year, they have been provided with an enhanced allowance and training budget, enabling them to attend internal meetings of both the Constabulary and the OPCC to observe decision making processes in action.

3.6.10 The Joint Audit Committee has a clear and agreed ‘Terms of Reference’ providing an effective source of scrutiny, challenge and assurance regarding the arrangements for managing risk and maintaining an effective control environment. The terms have been reviewed this year to extend the maximum tenure of the Chair, recognising that the current tenure length would have a negative impact on the efficient operation of the Committee.

3.6.11 The Police and Crime Commissioner has a well-developed and effective scrutiny function via the Police and Crime Panel. The Police and Crime Panel publicly hold the Commissioner to account for his performance and formally provide a role in scrutinising and commenting upon the Commissioner’s precept proposals, including a power to veto the proposed precept.

3.6.12 A key part of the Commissioner’s role is to hold the Chief Constable to account for both operational performance and financial management; the Commissioner ensures that this achieved both in public via the regular COMPASS meetings, a forum in which the Commissioner will publicly hold the Chief Constable to account on particular issues. In addition the Commissioner meets regularly in private with the Chief Constable to discuss performance, and each year provides a formal assessment of the Chief Constable’s performance.

3.6.13 The Police and Crime Commissioner has strong financial management arrangements at both the strategic and operational level and consistently obtains unqualified opinions for its annual accounts and value for money assessment. The Section 151 Officer is a member of the leadership team and all formal financial



decision making has the benefit of the advice and review of the Chief Financial Officer or their representative.

3.6.14 Key financial regulations and financial strategies form an important part of the Corporate Governance Framework together with effective risk based financial and performance reporting.

3.6.15 Financial management in key risk areas across the Police and Crime Commissioner focusses on activity and performance management alongside the budget management processes and the financial management framework is appropriately advised and supported by the Finance function.

3.7 Implementing good practices in transparency reporting and audit to deliver effective accountability.

3.7.1 The decision making guidance, protocols and templates referred to in the Scheme of Corporate Governance and the involvement of senior officers, legal officers and finance officers ensures that public reports are written in a clear and accessible way with sufficient information to enable members of the public to formulate informed opinions on the matters for decision.

3.7.2 The delivery framework provides a transparent cycle of reporting on core performance metrics. Performance information is published online and is easily accessible to staff, partners and the public.

3.7.3 The ‘Internal Audit Charter’ is presented annually for approval by the Joint Audit Committee. The Charter makes provision that where it is considered necessary to the proper discharge of the Internal Audit function, the Chief Internal Auditor has direct access to the Joint Audit Committee.

3.7.4 The ongoing work of internal audit is presented through a quarterly progress report to the Joint Audit Committee providing an overview of service performance; delivery against the plan; and progress made by the organisation in the implementation of management actions agreed to mitigate risks identified through internal audit work.

3.7.5 Representatives of External Audit routinely attend Joint Audit Committee meetings and present all External Audit reports. Any recommendations for corrective action detailed within External Audit reports are highlighted to the Joint Audit Committee who will track through to implementation. This is achieved through the clear and concise nature of the minutes to each meeting coupled with the inclusion of any overdue recommendations within the internal audit progress report.

3.7.6 The Internal Audit plan includes provision to review the Police and Crime Commissioner’s approach to governance, risk and controls for partnership working. Such reviews are formally reported through the Joint Audit Committee with any significant issues highlighted accordingly.

3.7.7 Where appropriate Internal Audit will gain assurances from third parties to contribute to their overall assurance opinion.

4 Obtain assurances on the effectiveness of key controls 4.1 Key controls relating to risks, internal control (including financial management), and

governance processes are identified by managers as part of the governance framework and recorded on risk registers. These are consolidated into the strategic risk register at a corporate level.



4.2 Internal Audit, as part of its planned review of internal controls regularly evaluates the key controls to determine their adequacy and also carries out tests to confirm the level of compliance. Together the results of each review enable an audit opinion on effectiveness to be provided to management, and any actions for improvement to be agreed.

4.3 External sources of assurance include the annual opinion and value for money conclusion by external auditors, and any statutory inspections, for example, the Health and Safety Executive, and other external assessments e.g. by the Information Commissioners Office. These reports are subject to consideration by senior management and appropriate responses are agreed to any recommendations for improvements. The reports are normally approved in public and published.

4.4 In conjunction with specialist Internal Audit support, the Police and Crime Commissioner has also applied the CIPFA Counter Fraud self-assessment tool to identify potential opportunities for enhancement.

5 Evaluate assurances and identify gaps in control/assurance 5.1 The Police and Crime Commissioner has made adequate arrangements to identify,

receive and evaluate reports from the defined internal and external assurance providers to identify weaknesses in controls.

5.2 Each team within the Police and Crime Commissioner has assessed risk and reported significant risks via the governance framework for inclusion within the Strategic Risk Register. The Internal Audit plan and reports have assisted the assessment of risk in business areas that are higher risk.

5.3 The Police and Crime Commissioner has responsibility for conducting, at least annually, a review of the effectiveness of its governance framework including the system of internal control. The review of effectiveness is informed by the work of the officers within the Police and Crime Commissioner who have responsibility for the development and maintenance of the governance environment, the Chief Internal Auditor’s annual report, and also by comments made by the external auditors and other review agencies and inspectorates.

5.4 In providing the annual report, the Chief Internal Auditor takes account of the reports from the internal and external assurance providers which have also been reported to the Joint Audit Committee. This Annual Governance Statement sets out the Police and Crime Commissioner’s arrangements for receiving reports and identifying weaknesses in internal control.

5.5 In line with the Internal Audit Charter, the key elements of the corporate governance framework are risk assessed and reviewed periodically by Internal Audit.

6 Action plan to address weaknesses and ensure continuous improvement of the system of corporate governance

6.1 Covid-19 - has presented a number of challenges to the delivery of the organisation’s core functions. Of most significance is the postponement of the PCC elections (due to take place in May 2020) for 12 months. This means that the primary document that outlines the objectives of the organisation, the Police and Crime Plan, will require a revision as the current edition is due to end prior to the 2021 election (a new interim plan has been finalised for publication in May 2020)



6.2 The organisation has established a business continuity group to manage internal issues arising from consequences of Covid-19 to ensure that business as usual can continue as much as possible, determining which programmes of work may be put on hold to release capacity to respond to new priorities and objectives.

6.3 Governance processes are continuing but through an alternative delivery mechanism (utilising Microsoft Teams to facilitate remote working and remote meetings), and existing risk management processes are being utilised to capture consequential issues and review the impact of existing risk. To enable the continued operation of the Joint Audit Committee, the PCC has extended the remote working capability via Microsoft Teams to include members of the Joint Audit Committee, providing them with the necessary tools of business to enable them to continue to provide scrutiny and independent assessment of activities during this unprecedented time, and Joint Audit Committee meetings continue as planned.

6.4 It is unclear whether any additional funding will be receivable from Government to support the PCC and Chief Constable (beyond that already announced by the MOJ to support commissioned services) in responding to the demands posed by Covid 19; if no additional funding is forthcoming the current spending and income losses extrapolated for the financial year by both the PCC and the Constabulary could be absorbed within the current level of reserves if that becomes necessary.

6.5 There is no cashflow issue for the PCC. Therefore, the overall financial position remains sustainable, despite the challenges.

6.6 There are no significant changes in governance or internal controls. 6.7 ICT Board - A Hampshire PCC/Constabulary specific ICT Board has been

established from April 2020. This Board will enable the PCC to have greater oversight and governance from performance, project delivery and financial control perspectives. This recognises the significant investment in both Hampshire specific ICT and joint ICT projects with TVP.

6.8 A specific change which sits alongside the creation of this Board is that funding for ICT projects will only be released from Reserves to fund projects once a business case has been signed off for each project (including timescale, resources, outcomes etc).

6.9 Uplift Programme – the PCC has implemented new governance arrangements to ensure timely release of funds to support the Constabulary in delivering the Government’s Police Office Uplift programme. The new Governance ensures that resource requests to support the Uplift programme are subject to scrutiny by the PCC CFO (alongside the Assistant Chief Constable with responsibility for Uplift and the Constabulary CFO), and funds are only released from the newly created Uplift Reserves once agreed by the PCC CFO.



7 In response to the Action Plan identified in the 2018/19 Annual Governance Statement:

7.1 There is a robust mechanism to ensure that an appropriate action plan is agreed to

address identified control weaknesses and is implemented and monitored. 7.2 The audit by the Information Commissioner’s Office resulted in a number of

recommendations in both areas of scope – governance and accountability, and data sharing. These were implemented during 2019/20, with high rated recommendations prioritised. The actions arising from the recommendations were reviewed by the Information Commissioner’s Office in a follow-up, desk-based audit, and additional recommendations made. These have been actioned, and an Internal Audit has been undertaken to provide assurance to management that all recommendations have been implemented and any residual risks have been appropriately mitigated or accepted. The ICO have confirmed there will be no further follow up and their review is complete.

7.3 A further Internal Audit review is planned in 2020/21 to ensure that the identified actions are imbedded and there are no material gaps.

Declaration We have been advised on the implications of the result of the review of the effectiveness of the governance framework by the Joint Audit Committee and that the arrangements continue to be regarded as fit for purpose in accordance with the governance framework. The areas already addressed and those to be specifically addressed with new actions planned are set out in this Statement. We propose over the coming year to take steps to address the above matters to further enhance our governance arrangements. We are satisfied that these steps will address the need for improvements that were identified in our review of effectiveness and will monitor their implementation and operation as part of our next annual review. Signed: Signed: Chief Finance Officer Chief Executive Date: Date: Signed: Police and Crime Commissioner Date:

Independent Auditor’s Report


Left blank for - AUDITOR’S REPORT TO A POLICE AND CRIME COMMISSIONER – GROUP ACCOUNTS INDEPENDENT AUDITOR’S REPORT TO THE POLICE AND CRIME COMMISSIONER FOR HAMPSHIRE

Glossary


Agency Services Services which are performed by or for another Commissioner or public body where the agent is reimbursed for the cost of work done. Amortisation The process of writing down the cost of an asset or liability through depreciation or repayment of principle over a suitable period of time. Capital Adjustment Account A Balance Sheet reserve which reflects the net surplus of resources set aside to finance capital expenditure and the depreciation, impairment and write-off of the historical cost of property, plant and equipment assets. Capital Expenditure Expenditure on the provision and improvement of assets such as property, plant and equipment and vehicles and major items of equipment providing benefit to the Commissioner over a life of more than one year. Capital Receipts Money obtained on the sale of a capital asset. Capital receipts can be used to finance new capital expenditure or to repay loan debt within rules set down by the government, but they cannot be used to finance revenue expenditure. Chief Financial Officer (CFO) The Commissioner and the Chief Constable both have a legal obligation under the Local Government Finance Act 1988 to appoint a person to be responsible for the proper administration of their financial affairs. This person is the Chief Financial Officer (CFO). Collection Fund Adjustment Account A Balance Sheet account which records the difference between the income included in the Income and Expenditure Account and the amount required by regulation to be credited to the General Fund. The Commissioner includes a proportionate share of Council Tax debtors and creditors due to the billing authority, which is deemed to be acting as an agent of the major preceptors, including the Police and Crime Commissioner. Credit Arrangements An arrangement other than borrowing where the use of a capital asset is obtained and paid for over a period of more than one year. The main types of credit arrangements are leases of property, plant and equipment. Creditors Individuals or organisations to whom the Commissioner owes money at the end of the financial year for work done, goods received or services rendered but for which payment has not been made at 31 March. Current service costs The increase in the present value of pension liabilities expected to arise from employee service in the current period.

Glossary


Debtors Individuals or organisations who owe the Commissioner money. Depreciation Depreciation represents the consumption of an asset due to deterioration. The value is included within the income and expenditure account as a cost of providing services but as there is no cashflow impact on the general reserve, it is taken out in the movement in reserves statement. Expected credit loss An estimate of the losses an authority expects it will incur from financial instruments. Expected loss allowance Some debts are unlikely to be recovered because something has happened since the debt was raised. An assessment of the reduction in recoverable debt is made both individually (for individually significant debts) and collectively. Fair value The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction. Financial Instruments Adjustment Account A Balance Sheet account which records the adjustments made to the value of assets and liabilities as a result of showing these at fair value or amortised cost on initial recognition and the subsequent accounting entries required to write the value of these assets and liabilities back up to the actual sum due or payable at the end of its expected life. Financial Year The annual period of accounting – i.e. 1 April to 31 March. Non-current assets Assets of significant value that yield benefits to the Commissioner for a period of more than one year. Government Grants Part of the cost of the service is paid for by central government. General grants can be spent at the discretion of the Commissioner. Specific grants (included within additional grants) are also paid to the Commissioner, but are ring-fenced for spending in specific areas. Minimum Revenue Provision (MRP) An amount required by statute to be charged to the movement in reserves. It ensures that authorities put aside funds for the repayment of loans. Past service cost The increase in the present value of pension liabilities related to employee service from prior periods arising in the current period as a result of the introduction of, or improvement to, retirement benefits.

Glossary


Precept The levying of a council tax rate by one authority which is collected by another. The Commissioner precepts upon the district/unitary councils’ collection funds for his council tax income. Revaluation Reserve A Balance Sheet reserve which records the accumulated gains on assets held by the Commissioner arising from increases in value, netted off for disposals and certain depreciation adjustments. Revenue Contributions to Capital Outlay (RCCO) Amounts paid from revenue funds (charged to the Income and Expenditure Account) to purchase capital assets. Revenue Expenditure Expenditure to meet the day to day running costs of services including wages and salaries, purchase of materials and services and capital financing charges. This is shown in the Income and Expenditure account. Reserves Accumulated sums which are maintained either to be earmarked for specific liabilities (e.g. pensions, insurance) or generally held to meet unforeseen or emergency expenditure (e.g. General Reserve).

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